Fremont, California-based Corsair Gaming (CRSR) - investors have been watching their shares plummet since mid-2021. After being a major beneficiary of secular gaming trends over the past several years, 2022 has been fraught with challenges, and Corsair has struggled to maintain its growth.
But even with its business under some renewed market scrutiny, much of Wall Street remains positive about Corsair thanks to its attractive valuation.
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A Sharp Drop Followed Q1 Preliminary Results
Corsair Gaming shares shortly after the company’s preliminary Q1 results were released. Although the company won’t release its full earnings results until May 5th, even the limited data released by Corsair was enough to cause a sour reaction on Wall Street., Corsair has been consistently improving profitability since 2018 on a capital-light model. Its CAPEX of $9 million represents less than 10% cash inflow from operations. The company has also managed to reduce its debt over the past several years. to Corsair itself, there is a great risk that gaming-tech advancements (especially cloud gaming) could adversely impact the company's business model.
When they leverage cloud computing, gamers become less dependent on processing power. That means players can access games with sophisticated graphics without necessarily needing super-equipped PCs. Companies such as NVIDIA, Intel, and Google are now the leaders in cloud gaming; that market has been growing steadily and is to reach a CAGR of almost 60% by 2024.
So, Is CRSR Still A Buy?
Although analysts have their price targets on CRSR after the last two company earnings came in below expectations, a bullish tone still prevails. According to the Wall Street consensus, Corsair is a “strong buy” with a nearly 70% upside potential based on the current share price of $16.44 (at last check).at a P/E ratio of 12x - that’s 35% below the industry average for technology hardware, storage, and peripherals.
However, not even the valuation seems to be enticing new investors to buy shares in Corsair. Many seem to be concerned the company is falling behind the rest of the gaming industry.about 3.2% of its net revenue from 2020 to 2021 in research and development to keep up with the latest industry trends. Maybe a further boost to R&D spending would help alleviate some investors’ concerns about the company’s future trajectory.
Right now, it’s up to individual investors to decide whether Corsair is a smart value play or a long-term losing proposition.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)