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On Sep 27, we upgraded our recommendation on computer peripheral company Logitech International SA (LOGI - Analyst Report) to Outperform based on its improved prospects. Logitech, which focuses on the lucrative gaming and tablet accessories market, also carries a Zacks #1 Rank (Strong Buy). The bullish sentiment came also on the back of the company's launch of innovative products in the tablet accessories market, which expanded its product range beyond the traditional PC market.

Why the Upgrade?

Logitech’s first quarter fiscal 2014 earnings came in at 2 cents, which outpaced the Zacks Consensus Estimate of a loss of 11 cents and a prior-year quarter loss of 32 cents per share. The company posted net income of $1.0 million in the reported quarter compared with net loss of $51.4 million in the year-earlier quarter. Revenues increased 22% from the year-ago period to $477.9 million, easily surpassing the Zacks Consensus Estimate of $428 million by 11.7%. Over the past four quarters, Logitech has delivered an average surprise of 28.2%.

Following the release of first quarter results, the Zacks Consensus Estimate for 2014 has surged 18.2% to 26 cents per share. Moreover, the Zacks Consensus Estimate for 2015 also increased 22.9% to 43 cents per share.

Apart from strong first quarter results, Logitech’s growth story looks compelling. Logitech, which was primarily operating in the outdated PC markets and incurring severe losses until a few months back, has now successfully transformed to capture the potential offered by the latest devices such as smartphones and tablets - which are stimulating the demand for peripherals and accessories. Logitech has tapped the opportunities in both the mature and emerging markets; The company launched a number of new and innovative products. Logitech’s new Apple Inc. (AAPL - Analyst Report) keyboard has been gaining strong momentum. In addition, its universal remote app for iPhone and Android is also helping revenue growth.

In addition, Logitech continues to tap the high potential market for accessories through expanding its product lines. Recently, Logitech introduced its first protective folios for Samsung Electronics tablets to expand its tablet accessories lineup. The new collection includes an Ultrathin Keyboard Folio for Samsung Galaxy Tab 3, along with Folio Protective cases for three different versions of Samsung Galaxy Tab.

In the latest reported quarter, Tablet Accessories was the best performer among its retail product category, with sales increasing a robust 143% year over year.  

Further, the company’s restructuring and turnaround plans along with strategic divestitures to become a more focused company also ensure long-term growth.

Other Stocks to Consider

Apart from Logitech, other stocks in the peripheral sector that are currently performing well include Alps Electric Co. Ltd. (APELY) and Planar Systems Inc. (PLNR - Snapshot Report). Both carry a Zacks #2 Rank (Buy).

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