When I first looked into Corsair Gaming (NASDAQ:CRSR), my initial reaction was apprehensive. I thought that the market for high-end expensive gaming rigs was too narrow. But I can’t argue with results because the company is making a surge. It’s been around for ages but of late, management is delivering growth. 2020 revenues were double that of 2017 and the run rate is expanding still. CRSR stock suffered a huge setback now but so did the whole market.
My conclusion is that owning it for the long term is a viable investment thesis. Going all in now is wrong for reasons to come at the end.
Perception is that Corsair is a hot new gaming thing but in reality it’s a legitimate business. Their product lines extend into a slew of peripherals to support many trends. Gamers, social media broadcasters, podcasters are all potential clients. I will most likely order one of their headsets soon.
The pandemic caused a rush into digitization and that means bigger demand for a while. Almost every home now needs PC cameras, microphones and headset, either for e-social gatherings or working from home. Telecommuting is now a reality and we are not going back from it.
CRSR Stock Dip May Be an Opportunity
The company results are stable and support the hubbub around its stock. I would not have said that in late 2020 when the herds were chasing it near $50 per share. CRSR stock is now 40% cheaper, so it’s worth a look. Sadly, they don’t ring bells for perfect entry points. But if someone wished they owned it near the highs they should consider it here. I don’t mean pile in with full force because I like to leave room for error.
The fundamentals suggest that a lot of the froth has already fallen off. CRSR has a 31 price-to-earnings ratio and while it’s not cheap, it is reasonable. It won’t be a reason to short it. Moreover, the price-to-sales is only 2. That is important because it suggests that the owners of it now are realistic about their expectations. They only give it credit for two years worth of sales in the stock price. For absolute comparisons, that’s almost four times cheaper than Apple (NASDAQ:AAPL).
These are uncertain times for stocks and the opinions are bifurcated. Wall Street says everything is fine by setting records. Yes, we’ve had a few red days but we are still within a foot of the all-time highs. On the other hand, Main Street says there is trouble. Millions of people are still out of work and the government is pumping $1.9 trillion in more stimulus. Those two things should not be happening at the same time.
This is to say that as much as investors may like any investment they should leave room for error. Good stocks can still fall to no fault of their own. If the markets correct, they will drag down the rest, including CRSR with it.
PCs Are Back Baby
PC’s have made a comeback. I remember a few years ago when tablets came about, the experts called computers dead. Now thanks to gaming and e-sports they are hot again. Proof is that I see them on retail shelves even in places like Costco (NASDAQ:COST). Corsair has gear for gaming, streaming, PC components even software.
I started out as an electrical engineer and I haven’t shed my tech bug. I could definitely be one of Corsair’s clients this year. They know how to reach me because they have great outlet partners. This includes giant retailers like Costco, Walmart (NYSE:WMT), GameStop (NYSE:GME) and Best Buy (NYSE:BBY). The Elgato line of equipment will make any techy drool.
Snap Out of It Nic and Back to the Stock
Technically, it’s in trouble and not because it’s down. The levels immediately below it are not technically significant. Therefore, they are not obvious support. The closest thing to that is near $28 per share. That served as the breakout in November so it should matter on the way down.
Even after it finds support, there will be challenges on the way up. If the bulls manage to regain momentum, they will face sellers at every ledge. Each support level that failed on the way down will be a problem on the way back up. I expect that sellers will be lurking at $35 and definitely near $39 per share.
For this reason and the overall market weakness, I’d prefer using options to catch this falling knife. Instead of buying shares and hoping for a rally, I’d consider selling puts.
For example, investors can sell the CRSR $22.5 December put and collect almost $5 for it. This trade does not need a rally to win. In fact, the stock can fall 45% and it could still break even. If investors had bought the shares instead they would have lost almost half their investment. Conversely, if the stock rallies then they would capture the equivalent of a 15% rally.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.