Jim Cramer is bullish on Logitech stock: should you?

Logitech (NASDAQ: LOGI) stock price is loitering close to the highest level this year as investors reflect on the recent results. The shares were trading at $64.77, a few points below the year-to-date high of $68.30. They have jumped by more than 55% from the lowest level this year.

Jim Cramer is bullish on LOGI

In a segment last week, Jim Cramer listed a few stocks that young investors should consider investing in. Some of the names he identified were DraftKings, e.l.f, Five Below, Lululemon, and Dutch Bros among others. 

Watch here: https://www.youtube.com/embed/m6SmlXUr3tE?feature=oembed

In a statement on Logitech, he noted that the company was well-positioned to do well in a hybrid working environment. He expects that demand for its working, gaming, and hybrid gear. 

The statement came a few days after the company published mixed financial results. Its revenue dropped by 21.94% year-on-year to more than $964 million. The revenue was better than the what analysts were expecting. Its earnings per share of 50 cents was better than expected.

The revenue declined mostly because of video collaboration, where revenue dropped by 25%. Gaming revenue fell by 22% while its creativity and productivity revenue were steady. Gross margins also declined by 340 basis points.

Logitech hopes that its business will remain under pressure this year and then start picking up. It expects its revenue for the first half of the year will drop by 22% to $1.8 billion while its operating income will drop to between $160 million and $190 million.

Logitech stock is grossly overvalued

Logiteh is still overvalued even as its business conditions worsen. It has a training PE ratio of 20.11, higher than the sector median of 18.17 and its five-year average of 19.37. Its forward PE ratio of 27 is also higher than the sector median of 24. 

Looking at its key business segments, there are growing headwinds. For example, gaming, its biggest category, is still showing signs of slow recovery. For example, videogame sales dropped by 5% in April to $4.12 billion while spending on accessories was flat.

Meanwhile, with many workers going back to the office, there is a likelihood that demand for video collaboration will remain under pressure. A good example of this was the weak Zoom earnings, which came out on Tuesday. Therefore, while Jim Cramer is optimistic about Logitech, I am a bit skeptical about its stock.

Technically, the stock is also forming a double-top pattern at $68.30 whose neckline is at $50. Therefore, there is a likelihood that the shares will find headwinds in the coming weeks unless buyers manage to push it above $68.30.