Logitech International SA: Tech Stock Soaring After Reaching Majo…

LOGI Stock Could Deliver Big Returns

At first glance, Logitech International SA (NASDAQ:LOGI) does not seem to be anything special, compared to the high-flying tickers in the tech world. The company is known for making computer peripherals, such as mice, keyboards, speakers, webcams, and tablet accessories.

The business may not seem as exciting as, say, building electric cars or running a giant Internet platform, but Logitech has been absolutely firing on all cylinders.

Consider this: in the first quarter of Logitech’s fiscal year 2021, which ended June 30, 2020, the company generated $792.0 million in sales, representing a 23% increase year-over-year. Excluding exchange-rate headwinds, its sales would have grown by 25%. (Source: “Logitech’s Growth Accelerates, Q1 Revenue Up 23%,” Logitech International SA, July 21, 2020.)

And it wasn’t just the top line that grew. For the quarter, Logitech earned adjusted net income of $0.64 per share, up a whopping 64% from the year-ago period.

Keep in mind that the June quarter was an extremely difficult operating period, when numerous businesses had to close due to lockdowns.

To put things in perspective, S&P 500 companies as a whole reported a blended year-over-year revenue decline of 9.3% and a blended year-over-year earnings-per-share decline of 31.6% in the June quarter. (Source: “Earnings Insight,” FactSet Research Systems Inc., September 11, 2020.)

One of the reasons Logitech International SA delivered such impressive results from April to June was the stay-at-home environment due to the COVID-19 pandemic. People used their computers to work, learn, and play from home, resulting in heightened demand for the company’s computer-peripheral products.

But since the economy has began to reopen, that increased demand should only be a one-time catalyst to Logitech’s business, right?

Well, according to the company’s latest earnings report, the results were quite the surprise.

In the second quarter of Logitech’s fiscal year 2021, which ended September 30, 2020, the company’s sales surged 75% year-over-year to $1.3 billion. In other words, the growth was even more impressive than the stay-at-home June quarter. (Source: “Logitech’s Q2 Sales Grow 75%, Operating Income Up Over 300%,” Logitech International SA, October 19, 2020.)

Note that this also marked the first time that Logitech’s quarterly sales surpassed the billion-dollar threshold. For a company that’s known for making keyboards and mice, exceeding $1.0 billion in quarterly sales is a major milestone.

Growth was across the board. In the September quarter, Logitech’s PC webcam sales skyrocketed 256% year-over-year. Tablet and accessory sales rose 145%, while video-collaboration segment sales increased by 165%. (Source: “Q2 Fiscal Year 2021 Financial Results,” Logitech International SA, October 19, 2020.)

In addition, Logitech’s gaming, pointing device, keyboard, audio, and wearables segments all posted double-digit-percentage sales growth in the quarter.

Better yet, Logitech managed to turn its strong sales growth into more profits. In its September quarter, the company earned adjusted operating income of $354.0 million, up a staggering 295% year-over-year. Its adjusted net income came in at $1.87 per share, which more than tripled the $0.50 per share it earned a year ago.

Moreover, Logitech has raised its outlook.

For the company’s fiscal year that ends March 31, management expects constant-currency sales growth of 35% to 40%, and adjusted operating income of $700.0 to $725.0 million.  Previously, the forecast was for 10% to 13% in constant-currency sales growth and $410.0 to $425.0 million in adjusted operating income.

Logitech International SA (NASDAQ:LOGI) Stock Chart

Chart courtesy of StockCharts.com

Analyst Take

As you’d expect from a company that does well in a stay-at-home environment, Logitech stock enjoyed a strong rally after the market sell-off in March.

And after reporting strong September-quarter results—and reaching the $1.0-billion milestone in quarterly sales—on October 20, LOGI stock shot up again. While that was followed by a pullback in early November, the stock has since recovered and climbed to new highs.

Bottom line: Logitech stock more than doubled in calendar year 2020, and if the growth momentum continues, I wouldn’t be surprised to see the uptrend also continue.