Logitech International (LOGI)

[FUNMAN]

Logitech: This Peripheral Company Is Poised For Growth
August 05, 2014

LOGI was getting way ahead of itself price wise earlier this year, so the PPS pull back was justified. Now that their execution caught up to the price, I agree that LOGI is finally going to start rising based on strong underlying fundamentals.

LOGI trades with the market, so down days drag it down. It's given back more than half it's gain after another terrific earnings report two weeks ago. I'm just waiting to see how the correction is shaking out and then I am going to add to my position.

Disclosure: I am long LOGI and bought several times during the spring and summer of 2013 in the mid $6's and low $7's.

Logitech (LOGI) concluded fiscal 2014 in a solid fashion, delivering better than expected results. It seems that its three-year turnaround strategy is on a roll. Logitech was pleased with sales of its products, which were well-accepted by customers, enabling the company to achieve its goals that it set at the beginning of the fiscal year. On the back of its strong momentum, the company expects its sales and profitability to improve in the future.

Strong opportunities ahead

Logitech is seeing exciting growth opportunities in PC gaming, while the growing acceptance of tablets, mobile speakers and other accessories are some more tailwinds. Logitech is also well-positioned to expand its footprint beyond its traditional PC peripheral business. Moreover, it is also keeping a check over its expenses. It expects its cost cutting initiatives to be a key earnings growth driver in this new fiscal year as well.

Logitech’s moves are more dedicated toward profitability, and the company is now focusing on innovation to deliver better products. In this regard, the company’s moves to hire a chief design officer should lead to long-term improvements. The company has seen good progress in customers' purchase satisfaction levels for its products, which is justified by 121 design awards that it won recently.

Cost-cutting moves

Logitech is looking to continue its cost-cutting moves to improve its top line and profitability. Besides these initiatives, Logitech is also working on strengthening its savings strategy. Recently, Logitech also booked a $5 million restructuring charge as a part of its infrastructure savings, but it believes that these short-term pains will lead to long-term improvements.

It has consolidated its Silicon Valley campus from two to one. With this consolidation, Logitech is moving into an open space environment to improve collaboration. The company appears to be in good shape, and with such commendable moves, it can become a faster and more profitable company in the near future.

The way forward

Logitech's business model can deliver consistent cash flow on an annual basis. The company is well positioned for robust performance in fiscal 2015. It is expecting much traction in the PC gaming segment, driven by the launch of its newest gaming peripheral, the G502 Proteus Core tunable mouse. This product is already in good demand in the market. The company believes that there is solid potential for it to drive share gains in fiscal 2015. Further, Logitech has said that it will launch new, innovative gaming products in the coming months.

Moving on to the tablet segment, Logitech is seeing positive trends and expects that sales of tablets will increase in the coming days. So it is working on positioning its tablet keyboard to capture the market. The low price on the keyboards will also be an added advantage for the company. Logitech recently announced three new protected cases for the iPad, and more product introductions can be expected from throughout the fiscal year.

In the mobile speaker segment, Logitech sees strong demand for its new speaker, the UE BOOM. The company was not sure about the acceptance of this speaker, but it has outpaced expectations and has become a key reason for tripling speaker sales in the last year.

Conclusion

Logitech is seeing positive trends throughout the business. In addition, the company is laser-focused on cost-cutting and innovations. As such, investors should definitely consider investing in Logitech for the long run.