International Trader – Europe: Logitech’s Business Was Already Booming. Then Came Covid.


Logitech stock is up about 400% in the past five years—and could keep rising.

Fabrice Coffrini/AFP via Getty Images

Logitech International has been one of the big winners of the coronavirus crisis, raising guidance twice already this year thanks to strong sales of webcams, keyboards, and software to workers locked down at home.

While Logitech’s (ticker: LOGN.Switzerland) legal headquarters and heritage is in Lausanne, Switzerland, it also has a Nasdaq listing (LOGI), and most of its senior management work out of an office on the West Coast of the United States.

Its shares have risen about 400% in the past five years, to a recent 76.34 Swiss francs, or $81.96 on Nasdaq. Yet the stock could have further to rise, as working from home becomes an enduring trend after the coronavirus, and strong demand for e-sports and computer games drives sales.

Tom Forte, an analyst at U.S. investment bank D.A. Davidson, has marked the stock a Buy, figuring it could rise to CHF105.18 ($116), suggesting a rally of about 40% from recent levels.

In an October note, Forte wrote: “We have compared companies’ abilities to exploit opportunities created by Covid-19 as akin to a sailor capturing the wind having built a superior boat.” He likens Logitech to a boat with three sails: 1) the main (video collaboration), 2) the jib (gaming), and 3) the spinnaker (self-broadcasting).

“As a result of management’s ability to position itself to leverage three significant secular shifts at once, we see Logitech as well-positioned for the remainder of calendar 2020 and beyond,” Forte says.

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Logitech is also rated a Buy by Michael Foeth, an analyst at Swiss investment-banking group Vontobel, whose CHF98 target price suggests 31% upside.

Logitech employs 7,000 workers and has a market value of CHF12.4 billion ($13.5 billion). It fetches 22.3 times this year’s expected earnings and is valued in line with its peers. In May, it posted net income of $450 million for the year to the end of March, which was an increase from $258 million recorded the year before. Net sales for 2020 were $3 billion.

CEO Bracken Darrell tells Barron’s, “We have positioned the business behind long-term trends, not Covid trends. Covid has accelerated them. We are growing markets and looking for new businesses to enter where we could be the leader.”

He sees plenty of opportunities. “While I don’t expect to grow at 75% forever, we should still be in long-term growth mode. We’re in a world where people increasingly need multiple places to work, and I see lots of potential.”

The business was founded in 1981 in Apples, Switzerland, by Swiss national Daniel Borel and Italians Pierluigi Zappacosta and Giacomo Marini. They wanted to call it Softech, but that name was taken, so they borrowed the root of the word logiciel—which means software in French—to create Logitech.

Before the pandemic, the company was already enjoying strong performance, selling hardware for computer games like Fortnite and League of Legends, and tapping into the booming e-sports market—a segment that, for some, could be filling the hole left by canceled sporting events.

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The trend toward working from home is likely to remain, in some form, even after the pandemic passes. Already, it has sparked a boom in demand for webcams, and there is likely to be a second wave of demand from workers returning to the office who will need webcams to communicate with others who still work remotely.

Assuming Logitech can overcome any short-term supply issues and perhaps shift some manufacturing to more sustainable materials, the stock is wired for further growth.


Content courtesy of MarketWatch published on , original article here.

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