The Cheaper Way to Leverage the iPad Air

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Early results for sales of the iPad Air have been stronger than expected, according to technology and gadget blogs, but if you don't have $525 to buy a share of Apple (NASDAQ: AAPL  ) , can you still participate?

There may be another way. Do you remember Logitech (NASDAQ: LOGI  ) ? That's right, the mouse company from Switzerland. Logitech may have fallen off your radar, but it's worth another look. When PC growth slowed as tablets started hitting mainstream, Logitech felt financial pressure as the end market for its products contracted. However, in the last year, growth has revived, both the CEO and CFO were replaced, and tablet-focused products were rolled out. In 2009 and 2010, the stock had settled near $20 before pulling back to a low of $6.24 earlier this year. 

Still PC focused but new products expand opportunity  
PC peripherals still account for 80% of Logitech's revenue, but the company has started participating in the tablet market (initially with Bluetooth speakers, then with an integrated folio/keyboard). These products have revived growth and helped the company post better-than-expected results in each of the last two quarters.  

Earlier in the year, hurdles were low and now expectations are higher, leaving the company to find the next product to provide a boost to revenue growth. The timing of the iPad Air launch might be just what the company needs. In the last two months, Logitech released folio keyboards for both the Samsung Galaxy and the iPad Air. While reviews for the Galaxy 3 have been less than stellar, the iPad Air has the potential to be a significant product cycle for Apple. Since Logitech relies on retail distribution for 97% of its revenue, ties to physical retailers are already in place.  

Differentiation at a premium price
The Fabric Skin folio differs from the competition in that it is spill-resistant and has full-sized keys with a keyboard-like feel. Spill resistance can be key if your children use it, if you work in places where spills can occur, or when you are traveling. Reviews have been positive, with the only negative being price. However, if you are buying a premium accessory for a premium product, you should expect to pay more.

Beating estimates with room for growth
In the most recent quarter, Logitech beat EPS estimates by $0.03, reporting $0.09 per share. Logitech is projecting sales of $2 billion for FY2014 and a return to GAAP operating profitability of $50 million, compared with an operating loss in 2013. This includes $13 million in restructuring charges. A 2.5% profit margin is considerably lower than that offered by many technology companies, but it leaves room for upside if new product adoption is better than expected.

The new CFO is putting his money behind the company
On Nov. 1, Vincent Pilette bought 14,000 shares at $10.32 apiece. While this is not a fundamental indicator, it puts new shareholders in good company. This combination of high quality products with extensive distribution puts Logitech in a good position to capitalize on a large product cycle at the time the hardware is launching.

Got iPad?
Apple's newest iPad Mini with Retina display might be hard to come by this quarter, given all the reports of supply constraints. Well, we're going to be sure to get a few -- and give them away! That's right: For the first time ever, The Motley Fool is hosting a contest where you can win a free iPad Mini with Retina display. All you have to do is tell us why you love The Motley Fool by clicking here! We'll pick the three most Foolish submissions to receive a free iPad Mini with Retina display.

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9/27/2016 4:00 PM
AAPL $113.09 Up +0.21 +0.19%
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LOGI $21.94 Up +0.10 +0.46%
Logitech Internati… CAPS Rating: **