What happened
Week to date, shares of Logitech International (LOGI +0.97%) were up 22% as of 10:53 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. A broader market rally on better-than-expected inflation data and a strong month of video game sales from leading publishers sent the stock higher.
Logitech is still down 24% year to date, but the stock has been beaten down to a low valuation, which could make Logitech an attractive value right now.
NASDAQ: LOGI
Key Data Points
So what
Activision Blizzard reported that over 35 million players had played Overwatch 2 following its release last month. Activision also reported record sales within the first 10 days of launching Call of Duty: Modern Warfare 2. Electronic Arts reported similar results following the release of FIFA 23.
Healthy video game sales could signal a turnaround for Logitech. The company is a top manufacturer of gaming mouses and keyboards, so the market is probably expecting high demand for the latest games to lift Logitech's sales next quarter.
It also helps the stock that its price-to-earnings ratio had fallen to less than 15 times trailing earnings per share, which was well below Logitech's historical trading range.
LOGI PE Ratio data by YCharts
Now what
Logitech reported a 12% year-over-year decline in sales last quarter, which isn't indicative of its potential. The company was growing sales before the pandemic. The problem is Logitech is suffering from the hangover of high demand for computer accessories during 2020. As a result, it might take a while for demand trends to return to normal.
What's most encouraging about Activision's news is that many of the players engaged with Overwatch 2 are new to the game. Indeed, that might spell better-than-expected sales for Logitech's products during the holiday season. The only wild card would be the economy, as analysts are expecting weak retail sales.
Logitech's previous guidance called for full-year sales to fall between 8% and 4% on a constant-currency basis. Investors should expect better results beyond 2023.
