I’ve been bullish on Corsair Gaming (NASDAQ:CRSR) stock since its IPO last year.
CRSR stock saw some action in mid-June after consolidating since December of last year. After gaining steam on Reddit’s r/WallStreetBets forum and Stocktwits the stock rose by 14% in a single day.
The reason for the renewed retail investor interest is Corsair’s short interest of 18.25% of free float. Sadly a short squeeze was not meant to be as CRSR stock found itself trading back down to previous levels within a week.
The $35 price level providing strong resistance to CRSR stock. From a technical analysis perspective, there seems to be a shift in sentiment against CRSR.
At the current price level just shy of $28, the stock is trading below its 200-day moving average. Coming from a long consolidation this does not bode well as it could be the start of a downtrend for CRSR stock.
Furthermore, the last two highs for the stock prior to the attempted short squeeze were approximately $51 and $47 respectively indicating three price points of lower highs.
A lot of the short-term enthusiasm has left CRSR. Because of this, I believe now is the perfect opportunity for longer-term investors to consider Corsair.
Q2 Earnings and CRSR Stock
Wall Street had been disappointed with Corsair’s Q2 earnings report as the company missed its targets. Company earnings came in at $0.28 just a cent shy of Bloomberg analysts’ consensus of $0.29 cents. This was enough to send CRSR stock down 7.1% that day.
Credit Suisse downgraded Corsair’s price target from $43 to $31 moving it from “Outperform” to “Neutral,” however, a lot of this pessimism is unwarranted in my opinion.
In Q2 2021 Corsair’s revenue increased by 24.3% year-over-year from $380.4 million to $472.9 million. The company’s higher-margin peripherals segment grew even faster than overall revenue. Peripherals net revenue for the quarter was $155.2 million an increase of 40.9% when compared to the same time last year.
The company’s earnings grew at a healthy pace as well. Corsair had a gross profit of $130.4 million a growth of 24.1% year over year. Gross margins remained steady at 27.6%.
Operating income decreased slightly by 4.7% year-over-year due to higher than expected costs. In 2021 Corsair expects to have revenue in the range of $1.9 billion to $2.1 billion and adjusted EBITDA of $245 million to $265 million.
Corsair’s Revenue Growth Is Impressive
Corsair’s impressive revenue growth was despite 2021 having tough pandemic comps. Remember that 2020 was a blockbuster year for the videogame industry due to the lockdowns and stay-at-home orders.
The fact that Corsair was able to grow revenues significantly off those highs means is a testament to the quality of its products as well as the underlying strength of the long-term gaming trend.
Gamers have continued to purchase Corsair products despite the re-opening of other entertainment options such as restaurants and travel.
Furthermore, Corsair’s revenue may actually have been artificially suppressed. There is a continuing shortage of semiconductors due to the supply-chain disruption caused by the pandemic.
Due to these ongoing issues, Corsair suffered shortages in Q2 2021 for graphics cards and other key components. According to CEO Andy Paul, the company also suffered a myriad of challenges such as logistics issues and port delays. This makes the growth rate for the quarter even more impressive.
There seems to be a rise in short-term-oriented thinking prevailing in the markets today. No doubt this is partially being driven by Reddit and the influx of new retail traders.
Even Wall Street is not immune to this sort of thinking given the knee-jerk reaction to what are pretty solid earnings results. This gives long-term-oriented investors the opportunity to purchase attractive stocks like CRSR at lower levels.
Although the stock’s short-term technical picture may be murky, there is no doubt that Corsair is a solid investment for the long-term.
On the date of publication, Joseph Nograles held a LONG position in CRSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.