As somewhat of a bargain hunter, I’m not a fan of chasing stocks after they’ve shot through the roof. But when a soaring stock is having a pullback, I pay close attention because it could be gearing up for its next big move.
Check out Corsair Gaming Inc (NASDAQ:CRSR), for instance.
Corsair Gaming is a computer peripherals and hardware company headquartered in Fremont, CA. As its name suggests, the company serves the video gaming community.
From personal computer (PC) components and peripherals, to streaming equipment and smart ambient lighting, Corsair Gaming offers a wide range of products to gamers, content creators, and PC enthusiasts.
For quite a few years, the PC industry wasn’t an investor favorite. One of the reasons was that global PC shipment volume seemed to have plateaued in the mid-2010s, making people question the industry’s growth potential.
But with the COVID-19 pandemic—and the related stay-at-home environment—the demand for PC products has strengthened. More people have been using PCs to work or attend school from home, and PC gaming has seen increased popularity.
Corsair Gaming Inc has been able to use this opportunity to grow its business. In fact, the company chose to go public in September 2020, with an initial public offering (IPO) price of $17.00 per share.
As the following chart shows, CRSR stock dipped on its first day of trading. However, it quickly bounced back and went on a parabolic bull run in November 2020.
Corsair Gaming Inc (NASDAQ:CRSR) Stock Chart
Chart courtesy of StockCharts.com
After reaching a peak on November 24, Corsair Gaming stock pulled back and seemed to enter a consolidation phase. But the growth momentum in the company’s business carried on.
Fourth-Quarter Financial Results
Corsair recently reported earnings. The report showed that, in the fourth quarter of 2020, the company generated $556.3 million in net revenue, which represented a whopping 70.4% increase year-over-year. (Source: “Corsair Gaming Reports Fourth Quarter and Full Year 2020 Financial Results,” Corsair Gaming Inc, February 9, 2021.)
The revenue growth was across the board. In the company’s gamer and creator peripherals segment, net revenue grew 104.0% year-over-year to $191.8 million. In the gaming components and systems segment, net revenue rose 56.8% to $364.5 million.
The bottom-line result turned out to be even more impressive. In the fourth quarter, the company’s adjusted earnings came in at $0.53 per diluted share. Compared to the $0.21 per diluted share Corsair earned a year earlier, that was a 152% increase!
Of course, given the dramatic rise in CRSR stock toward the end of last year, expectations were certainly high. But Corsair Gaming Inc managed to outperform those expectations. On average, Wall Street analysts expected the company to only earn a profit of $0.46 per share on sales of $528.0 million.
As we’ve seen plenty of times before, a massive earnings beat does not guarantee a post-earnings rise in share price. In fact, in the trading session following Corsair Gaming Inc’s fourth-quarter earnings report, Corsair Gaming stock slipped 2.8%. To give it some context, the broad market indices were largely flat on that trading day.
Sometimes the market turns bearish toward a company because it does not like the guidance. But that’s not the case at all with CRSR stock. Management expects the company’s net revenue to be in the range of $1.8 to $1.95 billion in full-year 2021. Wall Street, on the other hand, was predicting $1.7 billion in sales for the year.
In fact, Corsair Gaming Inc’s business might have been even stronger than its financial results suggested, as it had a hard time keeping up with the strong demand.
“Corsair continued to be supply limited for most of Q4 in almost every category. In other words, our sales could have been substantially higher if we could have manufactured and shipped more products,” said the company’s chief executive officer, Andy Paul, in the earnings conference call. (Source: “Corsair Gaming, Inc. (CRSR) Q4 2020 Earnings Call Transcript,” The Motley Fool, February 9, 2021.)
He continued, “Towards the end of the quarter, we were able to start filling retail shelves again and we saw our market share numbers starting to rise in many of our categories.”
In other words, the business has been firing on all cylinders. But the upward momentum in Corsair Gaming stock seems to have slowed down a bit.
Even though CRSR is a very new ticker, Corsair Gaming Inc has been in business for a long time. Founded in 1994, the company has shipped more than 190 million gaming and streaming products to customers in 75 countries around the world. That is, Corsair Gaming has established a strong position in the market.
As the gaming and streaming gear market continues to grow, the company’s business—and the price of CRSR stock—could see better days ahead.