JPMorgan Upgrades Logitech After Q3 Beat-And-Raise

Logitech International SA LOGI reported third-quarter results Monday that were well ahead of consensus expectations while raising its operating profit guidance for the fulll year. 

The Analyst

JPMorgan’s Paul Chung upgraded Logitech International from Neutral to Overweight and raised the price target from $38 to $42.

The Thesis

Logitech has shifted to a higher-margin growth product mix of gaming and video collaboration, along with keyboards, driving up gross margins, Chung said in the Wednesday upgrade note. 

Gaming has now become the company’s largest product category, accounting for 25 percent of its revenue, while video collaboration has been benefiting from rising demand for huddle room and conference room solutions, the analyst said. 

Logitech has an “excellent balance sheet with $584 million in net cash, not debt, leaving dry powder for tuck-in acquisitions, 2-percent dividend yield and share buybacks,” Chung said. 

Gaming revenue appears on track for robust double-digit growth in fiscal 2019 and 2020, and keyboards are benefiting from rising gaming demand, the analyst said. 

Keyboards could also see double-digit growth in 2020, the analyst said. Video collaboration is set to reach annual revenue of about $300 million, rising 60-percent year-on-year and accounting for 10 percent of the company’s revenue, according to JPMorgan. 

Price Action 

Logitech shares were up 6.65 percent at $35.94 at the time of publication Wednesday. 

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