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Bear of the Day: Logitech International S.A. (LOGI)

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Logitech International (LOGI - Free Report) makes everything from keyboards to streaming-focused video cameras. Logitech’s sales skyrocketed practically overnight during the early months of the pandemic as people splurged on video gaming accessories and essential work-from-home tech.

Like many early pandemic winners, Logitech stock became a victim of its own success. And now Logitech’s earnings and revenue outlook is trending in the wrong direction.

PC and Gaming Peripherals

Logitech is a standout in the peripheral equipment space. Logitech caters to everyone from hardcore gamers and remote workers to businesses and beyond. Logitech’s offerings include mice & keyboards, headsets & webcams, streaming-focused cameras, microphones, & lighting, as well as speakers, and more.

The Lausanne, Switzerland-headquartered firm has grown rather steadily over the last 20 or so years. Logitech posted seven-straight years of revenue expansion, including a 76% YoY surge during its fiscal 2021 that saw it climb from $2.98 billion to $5.25 billion.

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The remote works and home entertainment boom helped Logitech hit a homerun during the early months of the pandemic. LOGI even followed up its stellar, impossible-to-compete-against year with another roughly 4% sales growth during its fiscal 2022.

But the covid windfall is now gone, with the firm having posted five-straight quarterly sales declines, including a 22% YoY drop in Q3 FY23, which it reported on January 23.

Logitech’s earnings outlook has continued to fade as it deals “with macroeconomic conditions, including currency exchange rates and inflation, as well as lower enterprise and consumer spending.” Zacks estimates call for its FY23 revenue to fall 17% and for its adjusted earnings to sink by 31% against last year.

Bottom Line

Logitech’s earnings outlook has tumbled, with its near-term outlook fading the fastest. The firm’s most accurate estimates for the coming two quarters also come in well below the already beaten-down Zacks consensus.

All of LOGI’s negative bottom-line revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. Logitech’s Peripheral Equipment industry is also currently ranked in the bottom 32% of over 250 Zacks industries.

Logitech is still a strong company that makes top-of-the-line products that aren’t going anywhere. LOGI simply experienced an unprecedented covid pull forward/windfall that makes its YoY comparisons very harsh. Plus, the economy is slowing and people are cutting back on many non-essential items.

Logitech shares have mounted a bit of a comeback, up around 30% off their October lows. Despite the climb, LOGI still trades 60% below its summer of 2021 peaks.

The recent comeback of all things growth might inspire more people to jump back into Logitech, but the boom could also lead to a rather larger pullback. It seems wise for near-term investors to possibly stay away from playing LOGI stock right now. 

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