21 Jul 7 Reasons to Invest in Corsair Gaming!
Corsair Gaming, Inc. (NASDAQ: CRSR) is a leading developer of high-performance technology and gear for the gaming, content creation, and PC markets. The Company’s portfolio of products consists of award-winning PC components and peripherals, streaming equipment, smart ambient lighting, and esports coaching services for casual gamers to professionals.
The Company
The Company was founded in 1994 and has been pioneering innovative solutions such as the DHX dual path patented cooling system. Corsair began manufacturing world-class DIY components in 2015, followed by the revolutionary DOMINATOR memory high-performance DDR. It started manufacturing premium PC cases in 2009 and ventured into professional gaming peripherals in 2010. The Company introduced the world’s first RGB mechanical keyboards in 2014, which leveraged its AXON and OPX technologies to deliver unmatched speed and responsiveness.
Corsair One, an industry-leading compact gaming PC, was introduced in 2016. The Company won the prestigious Red Dot design award in 2018 and introduced elgato. It has many innovations to its credit, with products like Stream Deck, which has sold 1 million units and is still counting. The Company also manufactures professional-level gaming controllers, wireless technology, professional optics, and sound systems for content creators. Most recently, the Company has introduced the Dominator DDR5 and is looking forward to expanding to newer categories.
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The Company primarily makes hardware, software, and services, including gaming and streaming gear, PC components, gaming PCs, and software. Corsair’s comprehensive product portfolio includes monitors, cameras’ ambient lighting, headsets, microphones, gaming controllers, keyboards, mouse pads, mice, and gaming chairs, to name a few. The Company has established a solid global footprint with over 2,000 employees in more than 38 counties.
Corsair Gaming, Inc. (NASDAQ: CRSR)
Market Cap: $1.34B; Current Share Price: $14.08
Data by YCharts
Leading Edge Innovation
Corsair is constantly innovating and introducing new products into the market. The Company recently introduced two 32-inch gaming monitors, the XENEON 32UHD144 and XENEON 32QHD240, with high-refresh rates. The Company also introduced MP600-Pro-LPX solid-state drive for the console market, a high-performance storage expansion product for the PlayStation 5. Furthermore, Corsair has introduced the PlayStation 5 that can help build an RGB system with high-power GPUs and CPUs, besides the HD 60X capture card that supports the Variable Rate Refresh feature in PS5 and the Xbox Series X.
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The Company primarily targets a 24-million-dollar opportunity presented by PC gaming enthusiasts who contribute to more than 50% of the total addressable market. Corsair sees a vast white space where gamers demand better equipment and are willing to upgrade to dedicated gaming peripherals. The self-built PC TAM is estimated to be worth $46.2 billion by 2026.
Strong Revenue Growth
The Company reported $1.9 billion in preliminary, unaudited revenues for 2021. Most of its revenue is derived from gaming components and systems, contributing to 66% of the revenue, while gamer and creator peripherals bring in 34%. As per its Q1,2022 financial results, the company reported net revenue of $380.7 million compared to $308.5 million in Q1,2020. Corsair had a record first quarter in Q1, 2021, with revenues at $529.4 million due to impetus from the stimulus checks and strong demand. The decline in revenue was attributed to the decrease in revenue from the European Region following the start of the Ukraine conflict.
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Corsair’s Q1,2022 revenue was lower than expected compared to the Q1-2021results, which reflected the effect of stimulus checks and surge in demand for PC peripherals due to work-from-home scenario. However, revenues were still up by 23.4% compared to the pre-pandemic levels. The gamer and creator peripheral revenue stood at $134.1 million, which registered an impressive 76.8% increase compared to Q1,2020. The adjusted net income was $9.1 million, or $0.09 per share, compared to $58.1 million or $0.58 per share over the same period last year.
Owing to the present economic uncertainty, the Company has revised its revenue outlook for the year to between $1.6 billion and $1.8 billion, which is lower than expected. In addition, the Company also expects headwinds in the coming days due to the inventory levels with channel partners.
The Company had $29.4 million of unrestricted cash, no draw on its $100 million revolver, and $247.5 million of debt at face value at the end of Q1,2022.
Three-Pronged Growth Strategy
Firstly, Corsair aims to achieve strong growth in its current markets. The Company has been a formidable force in the computer-gear industry for over two decades. Multiple products of the company are leading the category with a majority market share.
Secondly, the Company intends to leverage years of experience, innovation, and leading technology to capture market share and stay one step ahead of the competition. Corsair’s products have an excellent reputation in the market for their high-end engineering and quality. The Company enjoys a loyal customer base for its products, who vouch for its quality, which gives it a competitive edge and enables it to maintain its leadership position in the market. Loyalty is essential in the peripherals market as the space is highly competitive, with multiple companies vying to increase their market share. Corsair has a strong brand name, which will keep it in good stead despite the tough competition.
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Finally, the Company is seeking opportunities to enter newer categories through organic growth and the acquisition of synergistic businesses. Corsair has made significant investments in sectors such as esports and gaming technology. The Company has acquired multiple entities such as Elgato, Scuf gaming, iDisplay, Gamer Sensei, Origin PC, and Visuals by Impulse.
Positive Outlook for the Future
As per its latest earnings call, the Company’s CEO Andy Paul acknowledged that while Corsair faced headwinds in the first quarter due to rising inflation, the Russia—Ukraine conflict, and high freight costs, the gaming hardware sector, on the whole, is experiencing positive underlying growth trends. During Q1, GPU cards were nearly 150% of MSRP, which is a significant premium. Despite the high premium, gaming PC build activity was still higher than the pre-pandemic level.
The Company believes that the GPU cards will be back to MSRP in a few weeks and may be available at a discounted price, leading to a surge in activity in the second half of 2022 and 2023.
Similar trends are also being seen in the peripherals market, with the market substantially above the pre-pandemic levels. The Company’s peripheral segment grew by 77% from Q1 2020 to Q1 2022.
An Industry with Immense Growth Potential
The advent of the Smartphone has revolutionized the gaming industry. There is an exponential rise in the number of gamers, which now stands at about 2.3 billion gamers worldwide. According to a report by Newzoo, the global games market valued at $137.9 billion in 2018 is likely to reach $180.1 billion in 2021, growing at a CAGR of 11%. Mobile games will contribute 59 percent of over $106.4 billion by 2021. Mobile and Tablet gaming alone contributed to over $70.3 billion in 2018.
Asia-Pacific regions will drive the growth in the market, with a steadily increasing smartphone user population generating $71.4 billion or 52 percent of total global game revenues. Countries such as China, the number one gaming market, and Japan are the largest spenders on mobile games. The average spend per payer in Japan is 1.5 times higher than in North America and more than 2.5 times higher than in Western Europe. In addition, China alone will contribute to more than 25% of all global game revenues, with over $37.9 billion in 2018.
North America is the second-largest game market, with a year-on-year growth rate of 10% and nearly $32.7 billion in 2018. Similar trends in Europe, Africa, and the Middle East generated combined revenues of $28.7 billion in 2018. Though lacking in average spending per payer, this segment will witness steady growth in the Smartphone population, making up for the revenues.
According to a report by Grandview research, the global gaming peripheral market was worth USD 3.88 billion in 2019 and is expected to grow at a CAGR of 10.4% from 2020 to 2025. The growing popularity of virtual gaming and esports will drive growth in the market. Furthermore, changes in user preferences, such as specialized gamepads and gaming keyboards that deliver better ergonomics for the user, propel the market growth.
Gamers are willing to spend on the latest cutting-edge consoles and peripherals for not only playing but also streaming on various social media channels for viewership. New age gamers also participate in gaming and esports events such as PUBG Global Championship and Call of Duty World League (CWL), which calls for specialized equipment to enhance gaming performance.
However, the prohibitive cost of specific equipment, availability of counterfeit products, and lack of customer awareness about quality differences between high-end and low-end rip-offs may hamper the market’s growth.
$3.5B Net Revenue by 2026
The Company is focused on achieving a net revenue of $3.5 billion by 2026. The growth is likely driven by a historical rise in the market for peripherals, components, and creator products. Corsair believes it can gain a 1% market share of the gaming components market per year owing to f iCUE and brand ‘stickiness.’ The Company anticipates a 20-25% growth in the high-end pre-built systems market, while the gamer peripherals products are estimated to grow at approximately 20% per year.
The creator products segment is expected to grow 20 – 25% per year, and the Company intends to offer more software and service products, with Stream Deck as the primary focus.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://www.grandviewresearch.com/industry-analysis/gaming-peripherals-market
https://ir.corsair.com/static-files/33df6cfe-1746-46f5-8320-8db10f79eac3
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