Corsair Gaming is “lagging” for investors with a 9% pullback after preliminary results and forecasted guidance is worse than expected.
Corsair Gaming (NASDAQ: CRSR) has grown hugely in popularity as a brand and as a stock to buy. Corsair Gaming is one of the most-discussed companies across social media and it has developed a cult-like following. Unfortunately for investors, the stock has been hard done by in 2021, sinking lower and lower.
In a recent statement, CEO Andy Paul stated:
“We believe that our 2021 net revenue has been held back at least 10% by global logistics and supply chain issues”.
It has issued preliminary results with net revenues significantly underperforming estimates. Expectations were for $485.2 million versus the now forecast $391 million. However, it raised guidance for 2021 from $1.83 billion to $1.93 billion. Supply issues factor in somewhat but the bad news likely comes off of a phenomenal 2020, when sales skyrocketed as home gaming became the main hobby for many spending more time at home with restrictions imposed worldwide
So what does Corsair Gaming do?
Corsair’s primary business is manufacturing PC components and accessories; everything from standard equipment like headsets and keyboards to mics, webcams, and studio lighting. However, CRSR is also engrossed in gaming, including acquisitions in streaming tools (Visuals by Impulse), eSports coaching (Gamer Sensei), and a gaming platform (Origin). It has two main target customers: gamers (professional as well as recreational) and content creators.
The Bull Argument
Corsair garners a lot of attention because it’s the market leader in its category. A quick scan of the reviews online and you’ll see it is among the top picks for gamers and content creators alike. It works with the biggest and best GPU suppliers in Nvidia and AMD and has collaborated with Ubisoft as well on projects. For a hardware business, it has healthy margins of 27.6% and is growing at a reasonable rate with net income up 24.3% year-on-year (YoY) in the most recent quarter. It currently has $134.6 million in cash and is slowly but surely paying off the debt on its balance sheet.
The Bear Argument
This is a highly competitive market and the nature of the product makes it difficult for any one company to develop a strong competitive advantage. Logitech, Turtle Beach, Nintendo, Sony, and Dell are just a handful of the many names competing in the space.
Corsair has become a market leader with a strong brand, good quality, and great communities for customers, but it’s very difficult to say if it can sustain its leadership position over the long term — history tells us someone new will come along eventually. Another concern is industry growth. While it may have some exposure, Corsair should not be confused with eSports or the wider gaming industry. Corsair’s primary market is the gaming PC market, estimated to be worth $36 billion in 2021 and only grow to $38 billion by 2024. The other main market is gaming accessories, which GlobeNewsWire estimates to be growing at a 9.68% CAGR, and will be worth only $4 billion by 2024. Considering Corsair is currently valued at $2.5 billion, I wouldn’t categorize it as a multi-bagger stock in any way shape, or form as many financial content creators appear to be suggesting.
So is it time to buy?
On paper, Corsair Gaming looks cheap, retreating to a P/E ratio below 16. Streamers and gamers aren’t going anywhere and CRSR may very well fit into a diversified portfolio.
That being said, we see better opportunities in the gaming space and beyond that have real multi-bagger potential. To see what we have our eye on, click here to access your 7-day free trial with MyWallSt.
Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.