Logitech Is A Logical Choice For Long-Term Investors Shares of Logitech pull back into a buying opportunity after blowout results, an increase to the dividend, and an increased share buyback plan.

Logitech Is The King Of Peripherals

Logitech International (NASDAQ: LOGI) just released one of the most fantastic earnings reports we've ever seen. The company not only produced robust growth on a YOY basis but strong triple-digit growth in the two-year comparison, accelerating sequential growth, record results, and results that outpaced the consensus by 3500 basis points. And on top of a tough comp, and with the analyst's consensus for the quarter up a whopping 50% from the low posted late last year but frankly, we're not surprised. Logitech is perfectly positioned for the times as the leading purveyor of digital peripheral devices. You know, all those after-market keyboards, mouse devices, screens, webcams, speakers, and gaming-specific devices we've all been buying over the last year.

Logitech Absolutely Smashes The Consensus Estimates

Logitech blew right through the consensus estimates and that really is saying something. The company has ten high-profile sell-siders covering the stock and they've been actively increasing their earnings estimates as well as their price targets. That's why the $1.54 billion in revenue is so exciting. It is truly a blow out a number, up 117% from last year, up 147% from two year's ago, and both the one-year and two-year comparisons are "tough" in that YOY revenue growth was recorded for both periods; 5% in the 2-year comparison, and 13% last year.

As amazing as the top-line results are, the earnings and guidance are even better. The company is an example of how earrings leverage is supposed to work with GAAP operating income up 818% from last year and adjusted operating income up 312%. The bottom line results came in at $1.31 GAAP and $1.45 adjusted or up 245% on an adjusted basis and better than expected by $0.50. As for guidance, the company is guiding for flat to slightly higher revenue (we think that is cautious) but raised the guidance for earnings to a range above the previously guided due to margin strength.

"We delivered excellent financial performance, including record net sales, operating profit, gross margin and cash flow," said Nate Olmstead, Logitech chief financial officer. "The trends that fueled our growth pre-pandemic - work from anywhere, video everywhere, esports and the democratization of content creation - all accelerated. As our market opportunities have expanded, and we have become a larger, more profitable company, we're investing in our capabilities to accelerate our innovation, reach new customers and deliver strong financial returns over the long-term."

Logitech Ups Buyback Plans And Dividend

Logitech is not a high-yielding stock at roughly 0.85% but it is an incredibly safe and growing distribution. Not only is earnings strength expected to continue but the payout ratio versus next year's earnings is in the sub-20% range. Add to that a fortress balance sheet with no debt or restrictions and the stage is set for not only a sixth increase (the company just announced a 10% increase making the 5th consecutive), but for it to be equally generous.

Logitech has also approved an increase to its buyback plans bringing the total to $1.0 billion from the previously stated $250 million. The company has already bought back about $165 million in stock leaving about $835 million remaining over the next 2+ years. With shares trading at $110, that's about 4.5% of the shares of outstanding and a significant tailwind for share prices.

The Technical Outlook: Logitech Pulls Back Into A Buying Opportunity

Shares of Logitech fell in the wake of the FQ4 report but we are not worried, quite the opposite in fact, because this stock will be setting new all-time highs fairly soon. The pullback has the stock trading at a valuation that is closer in line with the broader S&P 500 with accelerating trends driving results. In our view, this stock is merely testing its support and support has already begun to show itself. We expect to see price action continue to test the $105 to $109 range in the near term and then consolidate for a move higher later in the year. Once the $119 level is broken we see this stock moving into the $145 range at least.

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