The video game hardware and peripherals maker Corsair Gaming, Inc. (CRSR) went public on September 23, 2020. In operation for more than 25 years, the company has grown based on its consistent product innovations. The demand for its products accelerated amid the pandemic as people spent more time at home and video games became an essential source of entertainment.

The company also received a favorable verdict this month regarding a patent infringement case (Ironburg Inventions Ltd. versus Valve Corp).

However, the stock has lost 15.2% over the past three months to close yesterday’s trading session at $36.31. This can be attributed to  supply-chain constraints  the company is facing along with intense competition from its peers.

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

Strategic Acquisitions

The company acquired Visuals by Impulse (VBI) this month. VBI provides professional design for creators on Twitch, YouTube, and Facebook Gaming. VBI is expected to join CRSR under its existing Elgato brand.

Last November, CRSR  company acquired Gamer Sensei, the world’s biggest esports coaching platform. And in October it acquired smartphone app EpocCam in October 2020.

Consistent Product Innovations

CRSR launched its  KATAR PRO XT yesterday. It  is a new ultra-light gaming mouse and is well-suited for fast-paced FPS and MOBA gameplay. In late January it launched three new CORSAIR Gen4 PCIe x4 NVMe M.2 Solid State Drives – the MP600 CORE, MP600 PRO, and MP600 PRO Hydro X Edition.

SCUF Gaming, a subsidiary of CRSR, unveiled  a new SCUF H1 customizable wired gaming headset in  December. It is customizable and tailored for competitive gamers who prefer the zero-latency provided by a wired headset.

Impressive Recent Financials

The company’s net revenue increased 70.4% year-over-year to $556.34 million for the fourth quarter ended December 31, 2020. While the revenue from its  gamer and creator peripherals segment increased 104% year-over-year to $191.80 million, the revenue from its  gaming components and systems segment increased 56.8% year-over-year.

Also, its non-GAAP net income increased 214.8% year-over-year to $53.01 million for the fourth quarter, while its  non-GAAP EPS increased 152.4% year-over-year to $0.53.

Bleak Outlook for Post-Pandemic Scenario

Because  people have been spending more time at home amid the pandemic, the demand for CRSR’s products and services, such as gaming headset and computer cases, has surged.

However, because increasing numbers of  people are being  vaccinated for COVID-19, investors are optimistic about a quick reopening of economic activities. This could lead to a decline in demand for CRSR’s products, as people resume going out and pursuing outdoor entertainment activities at the expense of video gaming at home. Company CEO Andrew J. Paul said,  “We expect growth in the second half of the year to be more moderate as we expect a gradual return to activities outside the home”.

POWR Ratings Don’t Indicate Enough Upside

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

Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, the stock has a C grade for Momentum. This is justified given that the stock retreated  7.5% over the past month and gained 0.3% year-to-date.

CRSR has a C grade for Quality also.  While the stock’s trailing-12-month gross profit margin of 27.3% is lower than the industry average 48.2%, the stock’s trailing-12-month return on common equity of 31.6% is higher than the industry average  6.3%.

In addition to these grades, we also have given CRSR grades for Growth, Value, Stability and Sentiment. Get all CRSR’s ratings here.

Out of the 29 stocks in the B-rated Technology – Hardware industry, the stock is ranked #14.

Better than CRSR: Click here to access the top-rated stocks in the same industry.

Bottom Line

The company has  released impressive financial results for the last-reported quarter (ended December 31, 2020) along with the announcements of new product launches. However, CRSR faces stiff competition from its peers. Many of its peers are expanding in different sectors, unlike CRSR. Moreover, it remains to be seen if the company can maintain its strength in the post-vaccine world. So, it could be wise to wait for better indications before betting on the stock.

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CRSR shares were trading at $36.17 per share on Friday afternoon, down $0.14 (-0.39%). Year-to-date, CRSR has declined -0.14%, versus a 2.40% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

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. More...

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