Stock to watch: Logitech International SA (NASDAQ: LOGI)

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Logitech International SA (NASDAQ: LOGI) stock fell over 0.6% on 22nd October, 2019 (as of 11:54 am GMT-4; Source: Google finance) after the company’s Non-GAAP operating income rose to $89 million in the second quarter of fiscal 2020 from $85 million a year earlier. LOGI has reported net profit of $72.9 million, missing analyst estimates for $82.9 million, according to Refinitiv data.

But, the company’s sales grew 4% to $720 million in the second quarter of fiscal 2020, on the back of the performance of fast keyboards, mice and headsets that Logitech makes for players of online games like Fortnite and League of Legends. However, it missed the analysts’ expectation of $725.7 million, as per Zacks Investment Research. Due to further growth in the online gaming market, Logitech has recently doubled down on its involvement in online sports games, buying live streaming company Streamlabs in a deal worth up to $118 million. Cash flow from operations was $107 million for the quarter, compared to $85 million in the same period a year ago. At the end of September 2019, the company has generated cash, cash equivalents, and short-term investments of $575M. At the end of September 2019, the inventory was $338M, which is down $20M from Q2 last year. The inventory turns were 5.3 times, which is an improvement compared to 4.9 times in Q2 last year.

Moreover, despite unfavorable currency exchange rate and China tariff headwinds, strong operational discipline and a favorable product mix has led to an 80 basis point expansion in the second quarter 2020 non-GAAP gross margin of 38.4%. ​In the second quarter, the company’s Americas region posted sales growth of 5%. Video Collaboration sales were particularly strong in the second quarter and reached another record high. Gaming sales had fallen double digits, mainly due to a decline in sales of the headset products.  The sSales in the company’s EMEA region rose 10% and represented the third consecutive quarter of double-digit growth. During the second quarter, the sales growth in the Asia Pacific region was 3%, which is in line with Q1 FY’20 trends. Growth in PC Peripherals, Video Collaboration and Gaming were offset by declines in Audio & Wearables and Mobile Speakers.

The company confirmed its full-year 2019 outlook of expecting mid to high single-digit sales growth in constant currencies and $375 million to $385 million is expected in non-GAAP operating income.

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