Corsair stock: is this a long-term opportunity?

Despite its name, Corsair Gaming (CRSR) – Get the report from Corsair Gaming, Inc. does not manufacture video games or host online betting events. Instead, it’s a company that designs and sells computer hardware and peripherals specifically for gamers. Think USB drives, keyboards, power supplies and memory modules.

Over the past year, Corsair has trended on Reddit threads, mainly because, although the stock has decent fundamentals and a lower valuation than its peers, it has garnered a lot of short-term interest.

In 2021, CRSR stock lost more than 40% under the attack of short sellers. But Corsair management expects the company to see significant long-term growth.

During the company’s Virtual Investor Day 2022 presentation, Corsair announced ambitious financial goals. In particular, management estimates that revenues will reach $3.5 over the next five years.

Let’s see how Corsair could potentially reward investors with significant gains in 2022.

Figure 1: Corsair stock: is this a long-term opportunity?

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Corsair revenue forecasts

Corsair is currently the market leader in non-memory gaming components, with a solid 42% market share. Through its Elgato brand, content creation products have been the company’s primary growth driver. Last year, they accounted for a third of revenue from the company’s Gamer and Creator Peripheral divisions.

Still, the company plans to expand its growth into other categories, such as pre-built gaming PCs, streaming cameras, and gaming monitors.

Before the announcement of its quarterly results, Corsair revealed that he expects net revenue for 2021 to be around $1.9 billion. This is at the upper end of its previous guidance range of $1.825 billion to $1.925 billion.

This indicates that Corsair will exceed Wall Street expectations, given that the consensus calls for revenues of $1.88 billion for the year.

Longer term, for 2022, Corsair expects net revenue to be between $1.9 billion and $2.1 billion. It might not be mega-aggressive, but it’s not bad.

Figure 2: Corsair guidance for 2021 and 2022.

Figure 2: Corsair orientation for 2021 and 2022.

Why 2021 was a bad year for CRSR

Corsair has suffered from several headwinds since last year. Combined, they have caused CRSR to lose more than 40% of its share price in 2021.

At the same time, according to Yahoo financethe shorts represent more than 36% of its float.

What caused this poor performance of Corsair stock?

For one, the gaming hardware industry is highly competitive. Corsair is primarily focused on consumer sales, while rivals like Logitech (LOGI) – Get the Logitech International SA report and Dell Technologies (Dell) – Get Dell Technologies Inc Class C Report also have good business-to-business (B2B) sales.

Additionally, Corsair’s business is priced largely on the basis of its growth potential. The company’s long-term success depends on the development of new products, which has lagged behind those of its competitors.

Finally, supply chain disruptions helped to dampen Corsair’s business in 2021, as it did for many tech stocks.

Investors need to focus on the long term

Thanks to its decent fundamentals, CRSR has a strong buy Evaluation of the Wall Street consensus. Experts have set an average price target of $34, which would represent an increase of more than 60% by the end of the year.

Looking at its valuations, it appears that CRSR is undervalued. In February 2021, the stock had a price-to-earnings (P/E) ratio of 30 times. Today, its P/E ratio is 13, while the average P/E ratio in the gaming industry is 25.

Additionally, the global gaming market is expected to reach $257 billion by 2025. This makes Corsair’s earnings multiple not seem too stretched.

With CRSR emerging as a short sell target, bulls could benefit from a potential short squeeze, as well as the firm’s strong trading fundamentals.

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(Disclaimer: This is not investment advice. The author may own one or more stocks mentioned in this report. Additionally, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)