Corsair (NASDAQ:CRSR) has had a pretty successful 2020. Ever since its recent initial public offering (IPO), CRSR stock has rallied approximately three times toward the $50 price range. Now, the company’s shares have consolidated since that high and are trading around the $35 support level.
The appreciation of CRSR stock is warranted, though. For one, consider the tailwinds that the company had in 2020. Plus, the company also has growth prospects moving forward.
As such, I believe that Corsair is a great name to consider for investors with a long-term outlook.
CRSR Stock and Financial Results
Corsair recently released their results for the fourth quarter and full-year 2020. The report was quite spectacular.
For example, the company’s revenue increased by over 70% compared to the same time last year, ending Q4 2020 with revenue of more than $556 million. Moreover, the company’s peripherals segment drove the majority of the growth, with segment revenue increasing by an astonishing 104%. Components and systems revenue also had a healthy increase of nearly 57% year-over-year (YOY).
But Corsair’s full-year 2020 results were also extremely impressive. Full-year 2020 revenue increased by over 55% to $1.7 billion, for example. And since much of the revenue gains were from higher-margin peripherals, gross profit grew at a much faster rate than revenues. The company’s gross profit margin improved by an additional 6.9%, leading to a gross-profit increase of more than 107% YOY.
No doubt, these results can be partially attributed to tailwinds due to the popularity of gaming during the pandemic. But that doesn’t mean the party’s over for CRSR stock.
CRSR Could Appreciate More with High-End PC Expansion
I believe the popularity of videogames is a secular trend that will continue well beyond the pandemic. Right now, video game consumption is at an all-time high worldwide as individuals have been forced to stay at home and refrain from social gatherings.
Now, despite restrictions easing in 2021, most experts believe that this industry growth will continue. In fact, according to some, high-end gaming computers will make up 47% of gaming PC profits. In the short-term, we can also expect a boost of interest because we are entering into a graphics processing unit (GPU) refresh cycle, with new products coming from industry leaders like Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD).
This is good news for Corsair, whose suite of products are more tailored to the serious gamer. The company actually relies on a small number of what it calls “committed” and “competitive” gamers for the vast majority of its revenue — those who spend $1000-plus on their gaming PCs (Page 14). Based on the company’s research, these gamers make up roughly 18% of the 524 million total PC-gamer population. This means there are a lot of potential customers that Corsair can convert from “casual” to “committed.”
One good way to drive these conversions is through partnerships with popular gaming streamers. The popularity of e-sports and streaming cannot be underestimated. Today’s streamers are similar to celebrities, having the attention of millions of viewers.
Recognizing this, Corsair has a brilliant marketing strategy to capitalize on this audience: a streamer partnership program. The company partners with both up-and-coming streamers as well as more established content creators. If you consider streamers as the equivalent to sports athletes, then it makes sense for the company to equip these influencers with premium gear. In the end, this will lead to more sales for Corsair and more upside for CRSR stock, as fans start to emulate their favorite streamers.
The Takeaway for Corsair
Corsair has a relatively straightforward business model. And it is definitely executing that model well.
Based on my research, the company’s products are, in general, well-liked and popular. Plus, CRSR stock has a market capitalization of $2.93 billion. According to Seeking Alpha, it currently has a price-sales (P/S) ratio of 1.61.
Now, compare that to its much larger rival, Logitech (NASDAQ:LOGI), which has a ratio of 3.52. Apart from being cheaper on a P/S basis, being the smaller company allows Corsair to grow faster than its rivals. So, from these price levels, I believe CRSR has plenty of upside.
On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article.
