Is Corsair a buy?
It’s time to explore an overlooked company. Here is the break down of $CRSR, otherwise known as Corsair.
Current Price: $29.62
52/Wk High: $51.37
52/Wk Low: $14.09
Market Cap: $2.7 Billion
3 Month Performance: -10.27%
Read below for the break down!
Corsair ($CRSR) is a manufacturer and developer of technology and hardware for creators, video game players, and PC fanatics that was founded in 1994 and has since expanded into 75 countries.
Since its inception Corsair has shipped over 190 million products and looks to expand significantly in the future, with key growth drivers including the expanding eSports industry, video game streaming market, and the ascending digital entertainment phenomena that has taken the world by storm.
Digging into the eSports market, growth is expected to be significant. According to Statista the global eSports market was valued at roughly $1.0841 billion in 2020, representing a 50% expansion year-over-year.
Furthermore, the global eSports industry is expected to be $1.6177 billion by 2024 with over 577.2 million people supporting it.
Rounding out industry metrics, the PC Hardware market is expected to total $70 billion by 2023 as PC gaming itself becomes more common.
Breaking down Corsair’s brands, subsidiary brands include Elgato, SCUF Gaming, and Origin PC, all of which cover specific areas of the gaming industry.
Corsair is led by CEO Andy Paul who co-founded the company in 1994. Before Corsair, Paul was President of Multichip Technology.
The management team comprises leaders who boast experience from the likes of Canadian Solar, Opnext, Hewlett Packard, SGI, and more.
Leadership has been pushing to expand Corsair’s business model as well, shifting the company from a hardware-only business to a multi-faceted PC gaming leader offering customers Components, Products, Software, Systems, Services, Subscriptions, and Solutions.
The management team has continued to work on the business model and expand their product offering, launching 29 new products in Q1 alone.
Digging into the numbers Corsair has delivered robust earnings, beating Q1 2021 expectations with an EPS of $0.58, better than the analyst’s EPS consensus estimate of $0.33. On a quarter-over-quarter basis, EPS improved from $0.53.
Revenues continued to impress, with Q1 net revenues totaling $529.4 million, representing a significant 71.6% improvement on a year-over-year basis.
Breaking down revenues, the Gamer and Creator Peripherals segment delivered $175.9 million in net revenue, representing a 131.9% jump on a year-over-year basis. The Gaming Components segment delivered $353.5 million in net revenue as well, representing a strong 51.9% improvement year-over-year.
Shifting into profits and margins, Corsair reported a total gross profit of $160.3 million in Q1, representing a 103.9% increase in gross profit YoY. Below is a gross profit breakdown.
Gaming & Creator Peripherals:
$68.9 million (+211.1% YoY)
$91.5 million (+61.9% YoY)
On the margin front, gross margins impressed in Q1, landing at a much stronger 30.3%. Compared to a year ago, gross margin improved by a whopping 480 basis points.
Income improved significantly as well with leadership reporting a Q1 operating income level of $67.3 million, representing a 404.5% improvement year-over-year.
Net income accelerated along with operating income, landing at $46.7 million. Compared to last year’s $1.2 million in net income, the acceleration is significant.
Rounding out Q1 results, Corsair reported an adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of $80.4 million, representing a 196.6% improvement year-over-year. Do note, EBITDA margin increased by 640 basis points to 15.2%.
Finally, cost of revenue increased from a lower Q1 2020 level of $229.896 million to a higher $369.086 million, which is to be expected given the significant year-over-year growth and business model.
Leadership was upbeat.
"We're also very pleased to see that in Q1, we were the No. 1 market share position in every gaming components category," CEO Andy Paul said.
Looking to the future, management is bullish and raised FY 2021 guidance, now expecting revenues to land within a range of $1.9 billion to $2.1 billion.
The leadership team is also expecting FY 2021 adjusted operating income to land within a range of $235 million to $255 million and for adjusted EBITDA to total $245 million to $265 million.
Shifting into the balance sheet the numbers are solid.
Total Debt: $294 million
Total Liabilities: $846 million
Total Assets: $1.333 billion
Cash & Short Term Inv: $122 million
On a valuation basis, Corsair is relatively cheap.
Price to Earnings: 19.15x
Forward Price to Earnings: 14.74x
Price to Sales: 1.47x
Price to Book: 5.59x
Price to Cash Flow: 12.00x
Given the numbers the analysts are bullish with a mean price target of $50.00/share, representing a 68.80% upside.
The high price target is $55.00/share, representing an 85.69% upside, while the low price target is $47.00/share, representing a 58.68% upside.
The big money is quite involved with 69.16% of Corsair being owned by institutions. Top holders include EagleTree Capital, The Vanguard Group, and BlackRock Institutional Trust.
On a technical basis, Corsair could be presenting an opportunity. According to the six-month charts, the MACD is moving with slight downside momentum within a tight range around -0.62.
The six-month charts are also indicating an RSI of 41.02 and CCI of -85.07, both of which are on the low end.
Looking to the future, the bears believe that mobile gaming could end the PC gaming growth for Corsair, while the bulls see an expanding eSports, Streaming, and video game space as a strong runway for growth.
In short, Corsair ($CRSR) is a solid long term pick with expanding revenues, profits, margin, and income coupled with a solid management team, sound balance sheet, and a sizable market opportunity.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.