You can't be a video gamer, a PC user, or even a home entertainment watcher without using one of Logitech's (NASDAQ: LOGI) products.
The company develops and markets hardware and software products that enable or enhance digital navigation, music and video entertainment, gaming, social networking, and audio and video communication over the Internet.
The company's stock has risen by 16 percent so far this year. In January, Logitech announced "better than expected" sales of $628 million for the third quarter, up 2 percent on a year-over-year basis. Cash flow was way up, and earnings per share of $0.30 was up compared to a loss one year earlier.
The retail numbers tell the real story, with the company's combined retail growth categories up 62 percent, year-over-year. Tablet peripheral salaries were up 95 percent; audio wearables and wireless sales were up 79 percent; and video gaming sales rose by 25 percent in the same time period.
Those are numbers that are manna from heaven for a company that really needed them, after a 30-month period of mediocre performance from 2010-to-mid-2013 that saw LOGU's share price fall stagnate in the $8-$10-per-share range.
"We're pleased by our solid Q3 performance, with both sales and profit growth," notes Bracken P. Darrell, Logitech's chief executive officer. "We're encouraged by the robust sales in our growth categories, as well as the success of our ongoing initiatives to improve profitability.”
"We still have more work ahead, but our turnaround is on track as we continue to build a faster and more profitable Logitech," he adds.
Going forward, Logitech has upped its yearly outlook, calling for sales of $2.1 billion, up from $2 billion in its last outlook. Non-GAAP operating income should rise to $125 million, up from $100 million previously.
Why the continued optimism over Logitech, after two-and-! half years of tepid performance?
First up, continued high demand for tablet and gaming accessories should spur revenues forward for LOGI. According to the market research firm Canalys, tablet computers will comprise 50 percent of all PC market sales in 2014, with 285 million tablets sold in 2014, and 386 million sold by 2017. Gartner has tablet sales rising by 62 percent in 2013, and by another 37 percent in 2014.
"The increased availability of lower priced basic tablets, plus the value add shifting to software rather than hardware will result in the lifetimes of premium tablets extending as they remain active in the household for longer," says Ranjit Atwal, research director at Gartner. "We will also see consumer preferences split between basic tablets and ultramobile devices.”
Overall, the global personal computer market grew by 18 percent in the third quarter, a good sign for LOGI, which has seen market share pick up in Europe and along the Pacific Rim.
It's all sanguine news for Logitech, especially in the tablet market. It's the primary board manufacturer for Apple's (NASDAQ: AAPL) iPod, and its selling droves of its new durable, spill-resistant keyboards, especially to its public school customer base.
Logitech is also making a strong move into the mobile device peripherals market. New mobile accessories like the company's Keyboard Folio and Keyboard Folio Mini are strongly positioned to boost sales in the mobile market over the next few years.
The company is also in the midst of a significant operational and management change. Its entire management team was jettisoned in line with the company's pivot toward tablets and mobile devices and away from personal computer accessories. Ex-Whirlpool CEO Bracken Darrell now runs the show, and has bought a new sense of urgency to Logitech's business model that is really starting to pay off.
Wall Street is getting the picture, as Barclays (LONDON: BARC) and Goldman Sachs (NYSE: GS) have ! both upgr! aded the stock in the past six weeks, and that was before the strong earnings news from late January.
With new management, a new business model that is already reaping dividends, strong revenue and net income growth, and rational debt levels, LOGI should be a good pickup over the next few weeks.
The takeaway? Make sure to accessorize with Logitech, and give your portfolio a turbo boost this spring.
Brian O'Connell is an investment analyst at Investing Daily. He has appeared as an expert financial commentator on CNN, NPR, Fox News, Bloomberg, CNBC, C-Span, CBS Radio, and many other media broadcast outlets.
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