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Logitech On A Roll, But Whats Next As Market Wobbles

If there is one Company that has benefitted from COVID it’s Logitech, due in part to their product range spanning video conference gear, web cams and gaming products which have been in big demand. Now the Company is forecasting “flat growth” due to the pressures the CE market is facing.

While their Q2 2021 results were excellent, with the $1.31bn in revenue being a second-quarter record and 4% higher than second-quarter fiscal year 2021 revenues, the Company’s shares are starting to falter as analysts question what impact supply and components issues will have on the business going forward.

“In Q2 we delivered record sales, which beat last year’s exceptional sales levels, growing 4% in the quarter and 82% compared to two years ago. We also grew market share in the majority of our key product categories,” Logitech CEO Bracken Darrell said last week.

“We are confirming our full-year outlook, despite unprecedented supply chain industry challenges.”

During the earnings conference call, Darrell noted Logitech is positioned well in the video segment.

“With changing work environments, moving to hybrid and work from home, video is an amazing opportunity for Logitech,” he said.

A favourite of CE retailers in Australia and a major supplier to the likes of Harvey Norman, JB Hi-Fi as well as the specialist video conferencing channel, analysts are now arguing that Logitech (and the entire computer/gaming industry, for that matter) cannot sustain the growth achieved in 2020 and that shortages and shipping issues running into the peak retail period will have an impact.

Even after growing revenue 76% YoY in fiscal 2021 on average, Logitech management expects to retain, if not, all of that growth in the coming year.

With 83% of employers agreeing the transition to remote work in 2020 was successful, it appears the shift to remote and home-office models seems likely to persist beyond the pandemic which observers claim will benefit Logitech.

Research Company Gartner expects the share of work-from-home employees worldwide to increase from 32% in 2021 to more than 35% in 2025.

The Logitech G333 VR Gaming Earphones for Oculus Quest 2.

Prior to the outbreak of COVID, Logitech was a consistent performer, claim observers, due in part to their acquisition of gaming accessory Companies.

Their investment in capital (ROIC) has improved YoY every year since 2013. Since then it has risen from 1% to 23% in fiscal 2020.

In Australia, Logitech is seen as a highly recognisable and trusted brand whose products are consistent top-sellers in their categories.

Retailers believe the business is well positioned for future growth and future acquisitions in the work-from-home and business communication market could be on the cards.

For shareholders, Logitech has increased its dividend each year since 2013. Since fiscal 2017, the firm has paid $582 million in cumulative dividends. Logitech’s current dividend provides a 1.0% yield.

Logitech has also traditionally returned capital to shareholders through share repurchases.

According to Forbes Magazine, Logitech has, between fiscal 2017 to fiscal 2021, repurchased $362 million (2% of current market cap).

Logitech has $780 million remaining for future repurchases under its current authorisation.

During the past month Logitech shares have fallen 9.2%.

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