New Product Releases And B2B Expansion Will Shape Our Future

Key Takeaways

• Logitech's innovation and expansion in B2B sectors, especially video collaboration, are key to future revenue and earnings growth.
  
• Diversified manufacturing with reduced dependency on China and price adjustments should enhance margins and earnings stability.
  
• Geopolitical and economic challenges may pressure margins, with tariffs, logistics struggles, and consumer confidence issues risking revenue and operational stability.

Catalysts

Through its subsidiaries, designs, manufactures, and markets software-enabled hardware solutions that connect people to working, creating, gaming, and streaming worldwide.

• Logitech's strategic focus on product innovation and releasing 39 new products in fiscal '25, including best-sellers like the Combo Touch Keyboard Case and the Pro X Superlight Wireless Gaming Mouse, may contribute to future revenue growth.
  
• The company's expansion in B2B, particularly in video collaboration and the Education verticals, which experienced double-digit growth, is expected to drive significant future revenue and earnings growth.
  
• With plans to reduce the percentage of products sourced from China to the U.S. from 40% to 10% by the end of the calendar year, Logitech's diversified manufacturing footprint is likely to help reduce tariff impacts and improve net margins.
  
• By implementing targeted price increases in the U.S., Logitech is aiming to mitigate the impact of tariffs on gross margins, which could positively affect earnings.
  
• Logitech's commitment to maintaining operational excellence and cost discipline, with a focus on reducing product costs and controlling G&A expenses, is expected to support improved net margins and earnings stability.

Logitech International Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Logitech International's revenue will decrease by 1.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.9% today to 15.2% in 3 years time.
• Analysts expect earnings to reach $712.3 million (and earnings per share of $5.0) by about May 2028, up from $631.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.5x on those 2028 earnings, up from 17.8x today. This future PE is greater than the current PE for the US Tech industry at 17.8x.
• Analysts expect the number of shares outstanding to decline by 3.22% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.35%, as per the Simply Wall St company report.

Logitech International Future Earnings Per Share Growth

Risks

• Tariff uncertainties and geopolitical challenges could negatively impact gross margins, with potential tariff effects accounting for up to a 500 basis point hit if inventory isn't properly managed. This impacts both revenue and earnings.
  
• Negative macroeconomic conditions, such as lower consumer and enterprise confidence, could affect sales growth, particularly if demand weakens amid economic volatility. This impacts revenue and net margins.
  
• Persistent logistics challenges, such as potential freight rate spikes and trade disruptions, could increase costs and affect product availability, thereby impacting gross margins and earnings.
  
• The company's reliance on successful execution of its manufacturing diversification strategy—the shift away from China—carries operational risk, which could affect cost structures and net margins if not managed efficiently.
  
• Price increases required to offset tariffs may not be fully accepted by the market, potentially leading to reduced sales volume and pressure on revenue despite strategic intent and brand strength.

Valuation

• The analysts have a consensus price target of CHF76.391 for Logitech International based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF95.56, and the most bearish reporting a price target of just CHF62.13.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.7 billion, earnings will come to $712.3 million, and it would be trading on a PE ratio of 20.5x, assuming you use a discount rate of 5.3%.
  
• Given the current share price of CHF62.04, the analyst price target of CHF76.39 is 18.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.