Logitech sheds $2 billion in market cap as margin concerns overshadow profit beat

Logitech Sheds $2 Billion in Market Value as Margin Concerns Outweigh Solid Profit

Logitech Shares Drop Despite Strong Quarterly Results

(Refiles to spell out billion in headline)

By Paolo Laudani

Stock Performance and Market Reaction

Oct 28 (Reuters) - Logitech shares tumbled on Wednesday despite the computer peripherals maker reporting better-than-expected second-quarter profit a day earlier, as analysts pointed to profit-taking and concerns over margin pressures

The stock was down 10% at 1024 GMT, wiping about 1.5 billion Swiss francs ($1.81 billion) off the company's roughly 14 billion-franc market value. It had gained about 12% this year before the results were announced on Tuesday.

Analyst Insights on Margin Pressures

Vontobel analyst Michael Foeth attributed the pressure on the stock to Logitech's relatively low gross margin forecast of 41% to 42% for the December quarter, about 200 basis points below a year earlier, as well as weaker consumer demand in Europe.

Profit-Taking and Analyst Commentary

Kepler Cheuvreux analyst Torsten Sauer pointed instead to profit-taking.

"Q2 beat expectations and constitutes a strong outperformance compared to a soft PC market," Kepler said in a note on Wednesday.

Financial Results and Market Sentiment

The computer mouse and keyboard maker reported non-GAAP operating income of $231 million for the three months ended September, beating the $204 million consensus compiled by Visible Alpha and its own guidance of $185 million to $210 million.

Supplier Incident and Profitability Headwinds

AlphaValue analyst Maximilien Pascaud said the market reaction appeared excessive given that the incident at one of Logitech’s semiconductor suppliers at the end of June was now largely contained.

"However, the market's focus has quickly shifted to profitability headwinds: gross margins will face meaningful pressure from component inflation and rising freight rates, while elevated marketing and R&D spend continues to weigh on operational leverage," Pascaud said.

Exchange Rate and Reporting Credits

($1 = 0.8300 Swiss francs)

(Reporting by Paolo Laudani; Editing by Anil D'Silva)