Should You Buy the Dip in Corsair Gaming?

Corsair Gaming, Inc. (CRSR) in Fremont, Calif., is one of the leading global developers and manufacturers of high-performance gear and technology for gamers, content creators, and PC enthusiasts, having shipped roughly 190 million gaming and streaming products. It has been consistent in developing product innovations, and the increased demand for computer gaming equipment amid the COVID-19 pandemic helped boost its sales. 

However, the stock has declined 29.7% in price year-to-date and 7.5% over the past month to close yesterday’s trading session at $25.46.

CRSR is currently trading 50.4% below its 52-week high of $51.37, which it hit on November 24, 2020. Higher-than-expected logistics costs negatively impacted CRSR in the second q, and its logistics costs are expected to remain elevated in the third quarter. Moreover, its revenue is expected to be affected by global logistics and supply chain issues, especially by the lack of affordable GPUs in the retail channel. Consequently, the company has cut its full-year 2021 revenue guidance to $1.83-$1.93 billion from $1.90-$2.10 billion So, CRSR’s near-term prospects look uncertain.

Click here to check out our Video Game Industry Report for 2021

Here’s we think what could influence CRSR’s performance in the near term:

Consistent Product Innovation

On October 19, CRSR announced new, highly customizable additions to its ELITE line of all-in-one CPU coolers—iCUE ELITE LCD Display Liquid CPU Coolers. Last month, the company unveiled a stunning new monitor—XENEON 32QHD165—which is built from the ground up for gamers and creators and features an ultra-slim 32-inch QHD screen with a cutting-edge IPS LED panel to produce a beautiful 2560x1440 image. It also introduced its new SABRE RGB PRO WIRELESS gaming mouse on September 16.

Mixed Financials

For the second quarter, ended June 30, 2021, CRSR’s revenue from the Gamer and Creator Peripherals segment increased 40.9% year-over-year to $155.16 million, while its revenue from the Gaming Components and Systems segments came in at $317.75 million, up 17.6% year-over-year.

Its non-GAAP net income was $35.69 million, representing a 10.6% year-over-year rise. However, its non-GAAP EPS in the quarter came in at $0.36 compared to $0.37 in the year-ago period. Its total operating expenses increased 39.3% year-over-year to $95.64 million. Also, its non-GAAP EBITDA margin was 10.9% compared to 13% in the prior-year quarter.

Disappointing Analyst Estimates

Analysts expect CRSR’s revenue to decline 10.8% for the quarter ended September 30, 2021, and 9.9% for the quarter ending December 31, 2021. The company’s EPS is expected to decrease 51.9% year-over-year to $0.26 for the quarter ended September 30, 2021. Furthermore, its EPS is expected to decline 28.3% for the quarter ending December 31, 2021, and 3.8% in fiscal 2021.

Poor Profitability

In terms of trailing-12-month gross profit margin, CRSR’s 28.47% is 41.9% lower than the 49.04% industry average. Likewise, the stock’s trailing-12-month EBITDA margin and levered FCF margin of 12.82% and 5.16%, respectively, are lower than the 14.72% and 12.58% industry averages. Its 0.54% trailing-12-month CAPEX/S is also 76.9% lower than the 2.33% industry average.

POWR Ratings Reflect Uncertain Near-Term Prospects

CRSR has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. CRSR has a C grade for Quality, consistent with its lower-than-industry profitability ratios.

The stock has a C grade for Momentum, which is in sync with its 7.5% loss over the past month and 14.2% loss over the past three months. CRSR has a D grade for Stability.

Moreover, CRSR has a D grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will decrease.

Click here to see the additional POWR ratings for CRSR (Sentiment and Value). Also, the stock is ranked #38 of 50 stocks in the Technology – Hardware industry.

Bottom Line

CRSR’s revenue increased across all segments in the second quarter. However, the stock is currently trading below its 50-day and 200-day moving averages of $27.29 and $30.27, respectively, indicating a downtrend. Also, analysts expect its revenue and EPS to decline in the near term because it continues to be impacted by supply chain issues. So, we think it could be wise to wait for a better entry point in the stock.

How Does Corsair Gaming (CRSR) Stack Up Against its Peers?

While CRSR has an overall POWR Rating of C, one might want to consider investing in Technology - Hardware stocks with an A (Strong Buy) rating, such as Canon Inc. (CAJ), Seiko Epson Corporation (SEKEY), and Panasonic Corporation (PCRFY).

Click here to check out our Video Game Industry Report for 2021

CRSR shares fell $0.04 (-0.16%) in premarket trading Thursday. Year-to-date, CRSR has declined -29.71%, versus a 22.19% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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