On March 31st Logitech International (LOGI) trimmed its projected operating income to a current $140 million to $160 million, down from a previous forecast of $170 million to $180 million. In their statement the company announced, “The projected shortfalls in both sales and profitability are primarily due to weakness in the company’s EMEA (Europe, Middle East, and Africa) retail sales region. Logitech has experienced lower than expected demand for its retail products in EMEA from both distribution partners and consumers.”
As you can imagine, this has caused investor confidence to decrease quite a bit. Shares fell from $18 to the low $14 range on April 1st, the day after this news was announced. So what? Old news right?
Right. The new news is, Logitech (LOGI) just signed a deal with ZAGG Inc. (ZAGG) for distribution rights to their cool, new iPad case. This case comes equipped with a handy little bluetooth keyboard. I don’t know about you but last I checked the Apple (APPL) iPad is a pretty big hit. And one of the few criticisms of the iPad that sticks in my mind is its keyboard. Could this mean that Logitech is on the rebound? Here are supporting points why I believe it is:
- Logitech may have fallen recently but ZAGG sure hasn’t. This company has been making waves in the market recently, going from $2.50 in July, 2010 to $10.00 in January, 2011. They must be doing something right.
- As mentioned above, this iPad accessory is a good idea. Period.
- Logitech’s technical indicators are show very good signs of a turnaround in stock price. On both weekly and daily charts, stochastic, MACD, and RSI are bottomed out and looking to swing back upward.
- Logitech’s fundamentals/financials are strong. Sales and operating income from their most recent earnings were $2.34 billion and $150.18 million, respectively. Forward P/E is a solid 12.54. Price to Sales, Price to Book, and Quick Ratios are a nice 1.90, 2.20, and 1.43, respectively.
- The stock seems to have found solid resistance after its recent tumble. With a price currently in the $14.50 range, with resistance around $14.00 and a profit target around $20.00 (its previous resistance ceiling), you’re looking at a reward/risk ratio of about 11/1.
- It’s Logitech. Have you ever owned any of their quality products? I have, and I’ve always been impressed. Always. This is a great company whose stock price does not currently reflect their overall value.
In summary, this could be a very sweet value play. Logitech doesn’t strike me as the kind of company to just sit around and do nothing after their stock price takes a big hit. And this recent deal with ZAGG supports that theory. In my opinion, this stock is on sale right now. I like buying things on sale.