Plantronics Losing Market Share to Logitech?

Includes: LOGI, PLT
by: Eric Savitz

For the last week or so, the good times have been rolling for head-set maker Plantronics (NYSE:PLT). Following a strong fiscal second quarter earnings report, the stock has been on something of a roll, posting a roughly 16% gain. But there is a growing consensus that, well, enough is enough. Today, two analysts advised getting out of the stock.

Bear Stearns analyst Ted Chung cut his rating on Plantronics to Underperform from Peer Perform, based on a combination of a recent rally in the shares and weakening fundamentals.

Chung is keeping his current estimates of 98 cents a share for the March 2007 fiscal year, $1.18 for fiscal 2008 and $1.45 for fiscal 2009. He says fair value on the stock is $16.

“While investors may be encouraged about potential improvements in PLT’s core headset biz, we see continued slowdown owing to decline in corded headset sales somewhat offset by pick-up in cordless headsets, which could continue to pressure margins,” he wrote in a research note. “Concurrently, we see continued weakness in PLT’s consumer audio biz (speakers for MP3 players) owing to weak product line-up,which is unlikely to be addressed until Fall 2007 product refresh.”

One company gaining share from Plantronics in that market, according to Chung is Logitech (NASDAQ:LOGI). And as it happens, Chung today raised his price target and earnings estimates on Logitech, citing market share gains in the portable audio category. His price target is now $30, up from $29. He boosted his profit estimates for Logitech to $1.11 a share for the March 2007 fiscal year, and to $1.25 a share from $1.20 for fiscal 2008. Chung notes that Logitech will hold a meeting with analysts in New York tomorrow. “With successful introduction of new products across all of its segments,” he writes in a research note, “we think LOGI is well positioned to benefit from the upcoming holiday season.”

Manuel Recarey, an analyst at Kaufman Brothers
, also downgraded Plantronics today, moving to Sell from Hold. “We are downgrading…as we believe the 16% appreciation since it reported fiscal [second quarter] results has results in an unfavorable risk/reward profile and a valuation that assume an improvement in financial performance over the next six to nine months that we believe does not have a high probability of occurring, considering current market dynamices.” He maintains a $17 price target. Recarey says that as an alternative he prefers - deja vu all over again - Logitech.

This morning, Plantronics shares are down 87 cents at $20.24. Logitech is up 18 cents at $26.63.

PLT 1-yr chart: