Corsair Gaming Inc

Corsair Gaming Inc (NASDAQ: CRSR) specializes in high-performance gaming, streaming, and video creation equipment. Gamer and creative peripherals, as well as gaming components and systems, are among its sectors. Peripherals for gamers and creators Gaming keyboards, headphones, controllers, and the company's streaming gear are all included. High-performance power supply units, DRAM modules, and high-end prebuilt and custom-built gaming personal computers are among the gaming components and systems.

Latest News

• Q1 FY22 Financial results announcement: Corsair Gaming, Inc. released financial data for the quarter ended March 31, 2022, on May 5th, 2022. Inflation, the ongoing Russia-Ukraine crisis, and high freight costs were all challenges in Q1, but the business nevertheless saw favorable underlying growth tailwinds in the gaming hardware market.
• Launch of HD60X and new CORSAIR iCUE 5000T RGB PC case: Elgato has released the HD60 X, a new strong external capture card. With cutting-edge specifications and seamless compatibility with the latest generation of gaming consoles, the HD60 X allows anybody to broadcast and record their games in the finest possible quality. Corsair also revealed the new CORSAIR iCUE 5000T RGB PC case. The 5000T RGB boasts the most integrated lighting ever incorporated into a CORSAIR casing, with a distinctive contoured shape in black or white and 208 individually controllable RGB LEDs.

Q1 FY22 Financial results

• Decrease in top-line financials: Net sales were USD 380.7 million, which was consistent with the Company's preliminary revenue forecast from April 21, 2022. This is a 23.4 percent raise over the pre-pandemic first quarter of 2020, and a 28.1 percent reduction over the first quarter of 2021, which includes stimulus checks and pent-up demand. The revenue from the gamer and creative peripherals category was USD134.1 million, up 76.8% from the pre-pandemic first quarter of 2020 and down 23.7 percent from the first quarter of 2021. The European area accounted for more than 70% of the sales reduction in Q1 2022 vs Q1 2021, as European consumer mood fell rapidly following the commencement of the crisis in Ukraine.
• Declining in Financial profitability: GAAP operating income fell 103.7 percent to USD 2.5 million in the first quarter of 2021, compared to USD 67.3 million the year before. Adjusted operating income fell 83.4 percent to USD 13.3 million in the first quarter of 2021, compared to USD 80.4 million in the previous quarter. In addition, Adjusted EBITDA was USD 15.4 million, compared to USD 80.4 million in the first quarter of 2021, and GAAP net loss per diluted share was USD 0.05, compared to USD 0.47 in the first quarter of 2021. In the first quarter of 2021, the adjusted net income per diluted share was USD 0.09, compared to USD 0.58 in the previous quarter. According to the corporation, the peak of pandemic-related high freight costs and promotional headwinds occurred in Q1 2022, with gross margins expected to improve in the second half of the year.
• Balance sheet position: The company concluded the quarter with USD 29.4 million in unrestricted cash and USD 247.5 million in debt at face value, with no draw on the company's USD 100 million revolvers. The company spent USD 4.4 million on capital expenditures and USD 1.25 million on debt reduction. Corsair Gaming Inc also utilized USD19.5 million in net cash to buy a controlling 51 percent stake in iDisplay, as it continues to explore strategic ways to reinvest the money.

Key risks

• Technological advancement: The evolution of technology, as with rapidly changing times, is the key risk element for all organizations in the gaming and technology industry.
• Supply chain risk: In the current global Macroeconomic scenario the biggest concern for all the businesses is the disruption in the supply of raw materials and final goods. If the company’s current shortage continues, the company may suffer from the shortage of graphic cards resulting in falling profitability and operational margins.

Outlook

Corsair Gaming Inc expects the net revenue to be in the range of USD 1.6 billion to USD 1.8 billion for the full year of 2022. Furthermore, adjusted operating income is forecast to range from USD 100 million to USD 120 million, with adjusted EBITDA likely to range from USD 110 million to USD 130 million. The second half of 2022 is predicted to account for more than 55 percent of the year's overall revenue as inventory channels are expected to normalize in the latter part of the quarter second.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

CRSR's stock price has fallen 38.80 % in the past six months and is currently leaning toward the lower end of its 52-week range of USD 14.14 to USD 42.81. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD19.56.

Considering a 38.80% correction in the past six months with expected recovery, the weak results for the first quarter even with strong fundamentals, positive outlook, associated risks, and current valuation. We recommend a " Buy" rating on the stock at the closing price of USD 15.62, as of May 9, 2022.

One-year technical chart as of 9^th May 2022. Source: REFINITIV. Analysis by Kalkine group

Technical Analysis Summary

* Closing price as of May 09, 2022.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.