Why Logitech Stock Crashed After Earnings
Key Points
Logitech beat on sales and earnings last night, but earnings were still down significantly.
GAAP profits look worse than non-GAAP, and Logitech's free cash flow looks even worse.
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Logitech (NASDAQ:LOGI) stock, the Swedish computer peripherals manufacturer, tumbled 11.2% through 10:50 a.m. ET Wednesday morning despite beating earnings last night.
Analysts had forecast a $1.30 per share adjusted profit on $1.21 billion in sales. Logitech crushed earnings, reporting $1.51 per share for its fiscal second quarter 2027, and edged out the consensus forecast for sales as well with $1.22 billion.
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Logitech Q2 earnings
So why is Logitech stock down today after "beating earnings?"
Well, sales grew only 3% year over year, for one thing, and earnings, calculated under generally accepted accounting principles (GAAP), were only $1.25 per share. (Remember that the $1.51 reported was an adjusted, non-GAAP number.) Still, the GAAP earnings grew 9%, a pretty respectable growth rate.
Unfortunately, the quality of Logitech's earnings is a bit suspect. Actual free cash flow at Logitech was only $148.9 million in Q2. That's 17% less real cash profit than even GAAP earnings, which were, in turn, much lower than the non-GAAP number. Moreover, Logitech's FCF for the quarter declined 30% year over year.
So not everything's going great for Logitech.
What's next for Logitech stock
Logitech blamed an "incident" at one of its semiconductor suppliers for crimping its supply chain and, in turn, its sales in the quarter. This supplier is back up and running now and is "ramping up production." Still, lingering effects from the interruption have Logitech forecasting that sales will remain down year over year in fiscal Q3, albeit only 1% to 4%.
Trading around 20 times trailing earnings and 15 times free cash flow, Logitech isn't an expensive stock. But for the time being, it still appears to cost a bit too much to be worth an investment today.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Logitech International. The Motley Fool has a disclosure policy.
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