Logitech International LOGI announced that it has entered into an agreement to acquire San Francisco, CA-based software provider Streamlabs for $89 million in cash. Additionally, Logitech stock worth $29 million will also be paid to Streamlabs if certain revenue growth targets are met.
Streamlabs, whose software for live streaming allows game streamers to interact and engage with viewers, is expected to provide impetus to Logitech’s gaming portfolio.
Because of the direct association with content creators, it will be easier for Logitech to encourage them to use its products and run promotion of its products in live stream, influencing numerous viewers in turn.
The acquisition is not expected to materially impact Logitech’s revenues or non-GAAP operating margins in full-year fiscal 2020.
Logitech International S.A. Revenue (TTM)
Logitech International S.A. revenue-ttm | Logitech International S.A. Quote
Game Broadcasting: How it Will Help Logitech
Driven by cloud gaming and mobile gaming, the global gaming industry is experiencing a steady growth. The promulgation of 5G connectivity and more processing prowess in smartphones are expected to boost interactive and streaming-based gaming.
Moreover, e-sports are gaining traction quickly with events being telecasted on social media and streaming platforms including YouTube and Twitch.
Per ResearchAndMarkets, live game streaming will witness a CAGR of more than 19% between 2019 and 2025. Moreover, e-sports market is expected to surpass $1 billion by the end of 2019.
Notably, in its website, Streamlabs boasts that 70% of Twitch platform uses its software and tools. Reportedly, more than 15,000,000 streamers already use Streamlabs.
Streamlabs OBS, the firm’s popular live streaming app, not only allows streamers to stream on Twitch, but also on YouTube, Mixer and Facebook.
Thus, the pairing of Logitech and Streamlabs seems fit for the former to fortify its footing in this promising industry, as well as expand its presence in the gaming market.
Acquisitions to Aid Gaming Segment
Logitech is focused on boosting its gaming business. The company expects the Gaming business to offer multiple scopes for growth in the future. To this end, the cash-rich company that had $597 million cash and cash equivalents as of Jun 30, 2019, is relying on acquisitions to enter different domains of the gaming industry.
The acquisition of ASTRO Gaming last year is helping Logitech carve a deeper niche in the gaming peripheral market. This buyout is a strategic move on the company’s part to get a jumpstart on the console market, as it has historically targeted PCs, tablets and phones.
Moreover, the acquisition of Blue headphones also proved to be a key growth driver of its gaming segment. The revamped version of Blue Microphones’ G Pro headset for eSports players is doing well.
Zacks Rank & Stocks to Consider
Logitech currently carries a Zacks Rank of #3 (Hold).
Few better-ranked stocks in the broader technology sector are Chegg, Inc. CHGG, Radware Ltd. RDWR and Perficient PRFT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Chegg, Radware and Perficient is currently pegged at 30%, 18% and 10.8%, respectively.
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