Buy Logitech Stock Before Everybody Else Does

You shouldn't be surprised by the monster quarter that Logitech (NASDAQ: LOGI) quietly posted on Monday night, several hours after traders went home. Anyone following the iconic maker of mouse controllers, webcams, and other consumer electronics peripherals knows how the company is killing it these days. The brief sell-off earlier this month ahead of Apple's (NASDAQ: AAPL) iPhone 12 event may have added a new layer of uncertainty to the investment, but it was ultimately the mother of all buying opportunities.

It's impressive how even some of the biggest bulls on the stock sorely underestimated the demand for Logitech's gadgetry. The Switzerland-based icon had a quarter for the ages, dramatically jacking up its full-year guidance along the way. Let's take a closer look at Wall Street's Swiss miss.

A gamer wearing a headset celebrates a PC gaming win.

Image source: Getty Images.

Making connections

The trend was undeniable. The pandemic has forced families to beef up their homes to serve as virtual classrooms, corporate meeting Zoom rooms, and a hotbed of gossip during family online gatherings. Logitech is there with the USB headsets, Bluetooth tablet keyboards, and PC speakers transform your retro digs into the tech home of the future.

We've seen this momentum building all year. After six consecutive quarters of single-digit top-line growth, we saw revenue climb 14% and then 25% in the previous two fiscal periods. Logitech's fiscal second quarter is taking things to an entirely new level. Sales soared 75% in U.S. dollars -- or 73% in constant currency -- to hit $1.26 billion. It's Logitech's first quarter with 10-figure revenue.

Topping a billion on the top line is the culmination of the perfect storm. We're doing a lot of things from home, and Logitech is also a major beneficiary of the esports revolution as diehard gamers load up on its gaming mouse controllers, webcams, and microphone headsets.

The news gets even better on the bottom line with reported and adjusted earnings more than tripling to land on $1.56 and $1.87 per share, respectively. Wall Street wasn't even close. The consensus analyst estimate was calling for an adjusted profit of $0.57 a share on $834.6 million in revenue. Even the Wall Street pros perched at the high end here were only looking for earnings of $0.64 a share on $876.3 million in revenue.

Success has apparently taken Logitech by surprise, too. Six months ago it was only targeting top-line growth in the mid-single digits for what was then the new fiscal 2021 year. It revised that higher three months ago, eyeing 10% to 13% in revenue growth. Now it's projecting a sales gain of 35% to 40% this fiscal year.

Suddenly all of the fears that began to bubble up to the surface earlier this month ahead of Apple's iPhone 12 event seem petty. Who cares if Apple is introducing new smart speakers and other peripherals? Logitech has always faced stiff competition, but right now everyone's winning as the pie itself is growing.

Investors shouldn't get spoiled by Monday night's performance. The second-quarter burst on both ends of the income statement doesn't seem sustainable, but it's also highly unlikely that we return to single-digit sales gains anytime soon. Logitech has the toys that we crave in this climate, and it won't be long before more investors start seeing this old-school tech icon as a hot growth stock.

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Rick Munarriz owns shares of Apple and Logitech International. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Logitech International. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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