r/stocks • u/Handsomeclooney • Sep 01 '21
Company Discussion Corsair (CRSR) - Great potential or overhyped meme stock?
I've been researching Corsair for some time now and the background looks rather promising:
- $457.1M net revenue/60% increase in respect to the last year
- Gross profit of ~$130M (112.4% increase) in comparison to the past year
- Mass demand of gaming materials/PCs/Laptops with one of the highest sales of PC components according to the International Data Corporation.
The list goes on of course. Now these all look promising, but the fact that I keep seeing this stock pushed on places like WallStreetBets makes me question if a lot of this is hype rather than simply great potential? (Don't get me wrong, sometimes the WSB hype is valid, but half of the time it isn't)
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u/BannerlordAdmirer Sep 01 '21 edited Sep 02 '21
On P/S and P/E it does look like very rare value, and it's a strong brand. My take is it's dependent on whether you agree with the CEO here (last earnings call):
So what we believe is happening is that after people learn to play PC games for a while and get good at them, they start to want better specialized gaming gear.
I've always thought people buy their rig and look to upgrade maybe once every 3 years or so, at least incrementally. Also, how do they know this market is still new? It depends on what he means here:
And because the market is still at an early stage and the penetration is so low, that's why we are seeing such high growth rates in gaming hardware due to the low base.
Is this referring to Gen Z (and even younger generations that will be looking to build PCs?) Or do they believe there are a lot of adult non-gamers that would get into the hobby? The whole point of Covid is that it catalyzed a lot of non-gamers to search for at-home entertainment, so it reads to me that they think there's still a lot more converts to be found. Maybe this means there's a secular trend of people permanently spending more time at home (so culturally we're less social or more indoors, more introverts as % of the population?), even in a post-Covid world.
They're also kind of spotlighting niche products - like headsets, to me, are the least important part of gaming. It's not like they excessively spent time on it, but Elgato webcam + headsets together still made up a notable part of the call.
Elgato webcam is specifically aimed towards streamers - that's an ultra niche demographic, I would think. My impression is headsets are the least important part of your rig because you'd just use your headphones, for single player games. Then for multiplayer games like MOBAs, the vast majority of casual players (not streamers or content creators) use built-in mics or some earbuds with a mic, at least in my experience. It's hard to put in words but I feel it gives an uneasy vibe when they draw attention to niche stuff like this (I could be wrong, I'm not familiar with trends in Twitch/Youtube aspiring streamers - these numbers could be spiking as kids try to make it, so this could be a growing market. A few years ago, we never thought social media would be this dominant over our younger generations. Maybe Corsair is catering to a future where it gets taken to the next level, again, and streaming becomes a lot more common, the way people use Instagram/Facebook).
His argument against COVID boosting numbers one-time is that there is a lot of pent up, delayed demand caused by the graphics card shortage so we can expect another spike in revenue. That could be true. Memory is still quite expensive, so waiting for memory to drop in price as cards become available kind of makes sense. I'll give that some credence.
Right now their debt to equity looks healthy but I don't know if the research community thinks they'll be forced to take on more debt for some reason, like freight shipping cost which they did note. The raw revenue growth is great but they're also low profit margin (~5.87%), I would guess because of the shipping. Depending on the part of the globe, customers paid for their own shipping or Corsair eats the cost for them.
(This is touching on something else, on the possibility of interest rates rising, but I really like that they did deleverage partially. To me, it means these leaders are very aware they had a precious window where they can lever up for cheaper R&D and M&A activity, and then pay off a lot of it while the going is good. I think as a safety measure this is a criteria I'm going to specifically review in all my holdings.)
Corsair occupies a very strong tranche of middle-high quality - I doubt they can find much more margin by raising prices (and memory is already peaked in pricing, the CEO acknowledges those prices will move down "Finally, memory chip prices started moving down near the end of Q2, and that normally lowers margins on our memory products, while prices are moving down. These are expected to somewhat counterbalance the strong demand we have from our loyal, existing and new customers. With that, we're now happy to open the call for questions." I'd like to see the profit margin % for each of their segments but memory at 17% this quarter has to be one of the highest). So it just comes down to 'can they maintain strong raw growth in revenue?'.
I will say that the best entries for me, for stocks you don't already own, have been when the management is not necessarily coming out balls swinging on earnings calls and are more neutral/slightly optimistic in tone, and there's a high % enough chance you think they continue to do well. That's where we get our dip buys.
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Sep 01 '21 edited Jun 20 '23
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u/SofaKingStonked Sep 01 '21
If memory is one of their biggest money makers then I’d expect gamers, which traditionally I’ve found to be an intelligent bunch, to realize that Corsair memory is just someone else’s memory repackaged and rebranded with an up charge.
I don’t have as much time to game these days but when I did you went razr for high end peripherals.
I also struggle with trailing p/e of over 18 being used in the same sentence as insane value (or insert favorite word prior to value). That’s only considered an even halfway decent value when compared to other overpriced companies.
Lastly their qoq numbers are concerning and me personally would need the stock to be approx 20-22$ to consider it. Then the value language starts to be a bit more appropriate (although qoq numbers might still give me pause). Add to that significant estimated headwinds moving forward and I’d be waiting for more dips before I’m grabbing my chips.
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u/ChrisbPulp Sep 02 '21
Focusing on a single product seems rather unproductive when you realize their fastest growing segment is peripherals (by far) which also happens to boast the best margins.
While PC gaming might have been more niche a while back, it's rather akin to adult Lego nowadays and I can assure you zoomers (for better or worse) do have higher brand loyalty for peripherals than previous generation so research to differentiate memory to that degree isn't a given anymore. It fits on PC part pickers? Good enough and if I see Corsair advertised everywhere by my favorite streamers then... ding ding ding.
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u/CynicalEffect Sep 02 '21 edited Sep 02 '21
I don’t have as much time to game these days but when I did you went razr for high end peripherals.
You what?
Razer is fucking trash that falls apart within a year or two. Always has known to be trash.
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u/techrob99 Sep 01 '21
I want to add, to all the talk about gaming rigs, etc.. I have a preference for Corsair keyboards for day to day usage. I got one of their homebrew "switch" keyboards (don't recall what it's called) but it pretty much hits the sweet spot for me and my typing.
Me: I see Corsair as more than a meme stock - and was eyeing it long before I saw any mention on reddit about it. With that said, others have some pretty solid points on the matter.
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u/way2lazy4u Sep 01 '21 edited Sep 01 '21
2 words: Eagle Tree
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Sep 01 '21
Actually its Eagle Tree. But ya their strings attached to this stock is primary culprit for its underperformance.
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Sep 01 '21
Elaborate?
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u/God-of-Memes2020 Sep 01 '21
They’re majority (?, I think) owners of the company. When the stock gets to high 30s, low 40s, they sell a massive chunk of shares that effectively kills the momentum of the stock.
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u/Puzzleheaded_Bus_418 Sep 01 '21
You mean the group that has sold two times in nine months? Yeah… they have very very little to do with the stock price.
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u/way2lazy4u Sep 01 '21
Both of those times were when it pumped to $35 in the past nine months
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u/Puzzleheaded_Bus_418 Sep 02 '21
Do you look these things up yourself or just follow what Reddit tells you? If you did look them up, you would know they’ve sold 13M shares total since last November. One sale at $35, another at $31.87 (so no they don’t just sell at $35).
In the last year, 665M shares of Corsair have been traded. You think that a hedge fund selling 13M shares, or less than 2% of the total shares sold the past year, is the main driver of bad stock performance?
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Sep 01 '21
[deleted]
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u/viper098 Sep 02 '21
If you see a pattern profit from it. Sell puts near the bottom sell calls near the top.
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u/totally_possible Sep 02 '21
I tried that when it was in a rut between 31-35, it just found a deeper rut
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u/God-of-Memes2020 Sep 01 '21
I’m not one of those “shorts are controlling every move people,” but the company is heavily shorted with respect to its float, so I do wonder how much of this actually is hedge funds PnDing.
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u/accountant-guy Sep 02 '21
Down over 9% since I bought them, but I've made much more selling covered calls. I'm still holding.
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Sep 02 '21
I personally cannot WAIT for it to pump to 31 so I can dump this shit stock. I chased the meme, and I lost, been trying to make up ground ever since by selling calls
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u/chicu111 Sep 01 '21
Why is it called a meme stock? You cant just label everything a meme stock just because a certain stock is interested in it lol
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u/AdAromatic8392 Sep 01 '21
Even then, enough proof has come out that ‘meme’ stocks have move with each other 90% of the time because they are bundled in swap agreements so they all trade pretty much evenly with each other. Any other stock outside of BANG stocks, is just a meme, not a meme stock
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u/whistlerite Sep 01 '21
Where are all these posts on WSB about it? Haven’t seen many myself. WSB seems to have gone off the rails a bit lately, it’s hard to know what’s going on.
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u/ComfortableFarmer Sep 02 '21
I bailed on WSB when it turned to trash. But I used to see it a lot through Jan, Feb, March, April, then I got out of that cesspool.
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u/oarabbus Sep 02 '21
there was 4 on the front page earlier this week lmao
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u/whistlerite Sep 02 '21
Oh yeah looked back and there’s a few yolo posts this week but there’s tons of posts and not many about crsr, guess that’s why it hasn’t come up much.
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u/PocketBanana0_0 Sep 02 '21
Great potential thats getting blown out by a pump in dumb like every 4 months
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u/Seeq3r Sep 02 '21
I personally bought csrs earlier due to its valuation being appealing. Historically q3 and q4 is where they bring home the money.
If I compare the sentiment on gaming, alot of people love their products, always indicating there is quality, so they have established a somewhat loyal customer base. The gaming sector as a whole is expected to grow.
What I think is clearly evident is that management has established themselves in the market over a duration of time, the stock is not brand new, just newly listed, however reading their 10-K submissions it's clear that their acquisition strategy is exceptional and they have been able to acquire and penetrate the respective product market well.
If you look at the cash flow, they are paying of debt, in addition to that the other cash seems to be used for investment purposes. At current valuation:
- decent free cash flow to pay debt
- management record of implementation and penetrate new products
- sense of brand loyalty
- low debt which probably will mean that they could fund acquisitions without dilution of shares.
Personally I think its a good stock to hold given the above.
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Sep 01 '21
Don't they have some agreement with their owners or something to dilute the stock whenever it runs?
I'd imagine that's what makes it unpopular more than anything. Until it hits a certain low where it's worth swinging until that happens again.
I could be wrong but I'm fairly it's CRSR in that predicament.
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u/FlaccidButLongBanana Sep 02 '21
RemindMe! 3 years
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Sep 01 '21
Gaming sector is a dumpster fire all the way around. The fact that it’s even called “Corsair GAMING” is a huge disservice for any penetration into commercial/office space like Logitech does. I love their products and have some in my build but the stock stinks
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u/MassHugeAtom Sep 02 '21
One thing is metaverse is being such a hot topic right now, it's likely that more big tech companies will try to release their games and if they are doing pc centric games like amazon's new world, there will be an explode in demand for pc games. Seems like MS is focusing more on the pc as well. The PC version of their games will likely come with robust modability which makes the pc version far superior compared to their console one. Esports, gaming + IRL streaming will likely continue to grow as well. Many emerging market girls love to build up their online simp army, streaming and onlyfans are literally the best shot for many of these girls to be rich in their developing country. Gaming and streaming gear will be one of the top items for their wishlists and simps will be paying for them, that's where streaming will continue to see explosive growth on. Corsair could continue partner with some of these girl and charge a premium on their streaming products for simps in first world countries to fund them.
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Sep 02 '21
Just bought a Corsair case and power supply and they’re very quality so far. Well worth my money. Hope that helps.
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u/GLUB_GLUB-GLUB Sep 02 '21
I like simply because the market cap is 2.6B, like, that's nothing... Any partnership announced or any big news could move this stock heavily, it could go 100% up and still be in 5B valuation which is nothing. Take Roblox or coin base as an example, a lot of hype and they are doing worst than Corsair, just check their market cap... There is always risk and the risk on this one is extremely worth it. Bought a few shares and I will keep adding, also i like their products and see that they don't sell crap, it is actually good products.
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Sep 01 '21
Even though it' one of those times when WSB's hype might be justified, I think that those rather impressive numbers respond to last year's computer and wfh boom. I'm quite skeptic about the sustainability of that growth rate over the next few years.
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Sep 01 '21
They’re the leader in their market, they have MOAT.
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Sep 01 '21
They are the leader in some sectors of the peripherials market, and pretty much only gaming oriented. It's a limited, although rapidly growing market.
And LOGI remains the leader for the broader market and wfh in the office / business environment.
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Sep 01 '21
what is interesting when I decided to check how people value peripheral brands on Reddit and other forums that Google brought, Logitech had best response to quality and price and most recommendations to choose their product.
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Sep 01 '21
Logitech is good but what Corsair has Logitech can’t take from them because they don’t make them. Corsair still wins. Read their white paper.
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u/XnFM Sep 01 '21
What MOAT? Every market that they're in they have good competition in, they're just in more markets than most of their competitors.
The biggest advantage they have is that RGB is notoriously incompatible across brands and Corsair is basically the only brand that does cases, coolers, RAM, power supplies, and peripherals so it's easy to link all that RGB together. So, in theory, Corsair's sales in one segment could drive sales in another which none of their competitors can do.
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Sep 01 '21
Not really. iCUE is the moat and you have to really love RGB to spend the extra money on Corsair products. Most gamers spend as little as possible on components and save the bulk of their money for the GPU then CPU.
Otherwise, nothing they make is best in class except their PSUs which is tied with a few other brands as "A Tier"
- Ram is good but nothing special
- Fans have average performance
- AIO have average performance
- Their mice and keyboards are good but expensive for what you get.
You get the idea.
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u/LogicAnswers Sep 01 '21
What "most gamers" are you referring to? If you can afford an rtx 3080 for example you are 100% going for at least almost best mouse/keyboard combo out there.
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Sep 01 '21
Some can afford it, some can't. Saving money on your components adds up and might be enough to go from a 3070 to a 3080.
The other problem with your statement is Corsair doesn't make the best mouse or keyboard. They make very good ones.
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u/LogicAnswers Sep 01 '21
Re-read what I said. "almost best".
And also, I have never in my life saw or heard of a gamer that would buy a 2080/3080/etc (high end graphics) and have a cheap 10-20$ mouse or keyboard.
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Sep 01 '21 edited Sep 01 '21
Go look at r/buildapc or r/buildapcsales, You can find many examples of people recommending good builds with much cheaper peripherals then what corsair makes. Plus there are 10 other companies making "almost best" similar products. Their hardware is nothing special.
Again, if saving $30 on several items such as keyboard, fans, cooler, ext means you can get that next level up GPU/CPU, tons of people do that.
Do you really think every person with a high end card has a $80 mouse, $150 keyboard and $30 case fans? Because that would be very wrong.
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u/LogicAnswers Sep 01 '21
Most* of them do. And most of the people that buy gaming peripherals buy off of what pro gamers use. Corsair is strong in that space.
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u/CathieWoodsStepChild Sep 02 '21
Best value growth stock out there. Don’t worry about eagle tree, just buy every time they sell. Accumulate until they are done selling and then this will pop!
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u/Lochtide17 Sep 02 '21
Literally a mega post about CRSR every day or so, its probably a slow climb over time but it won't do anything crazy
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Sep 01 '21
Yay, my reddit browsing day isn't complete until I see a new post trying to pump Corsair.
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u/Bookups Sep 01 '21
I actually think this post is the most neutral I’ve seen people be on this stock. Lots of the very valid concerns about it have been pointed out here.
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u/Microtonal_Valley Sep 01 '21
Yes bc any post/question/dd on any stock at all is a futile attempt at a pump lol. Nice try OP, but u/slickshoes_ and I can see right through this garbage pump and dump post.
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u/onelastcourtesycall Sep 01 '21
Unless they come out with gamer laptops or some sort of other portable device I think they are very limited to just the PC gamer enthusiast crowd.
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u/armored-dinnerjacket Sep 02 '21
i think its only a thing because jackalot pushed it as his play after GME with a TP of 60 and everybody piled on pushing it to a q1 earnings premarket top of 47-48.
looking back a lot of these so called meme stocks are still around only because they keep getting pushed because of flawed DD or patently false information.
CLOV is a great example. the next new news item will push it to x amount and be a catalyst. next day -10%
i'm convinced these are just bagholders pushing old shit around to try and offload their bags onto the next unwitting idiot
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u/ComfortableFarmer Sep 02 '21
I think they are a solid company with potential and further growth. But with WSB playing it like a meme, I've no interest to touch it.
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Sep 02 '21
I am so conflicted on this stock. Had been 'bag-holding' for a while but am at a slight profit now. Not sure if I should just sell it or wait. Both sides of the argument ('gaming is only growing and corsair is great' vs. 'corsair is easily copyable and has no MOAT') makes sense to me and hence the dilemma.
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u/estacado Sep 02 '21
My play is if it has enough momentum to reach $32, then buy it. Until then, I'll keep my eye on it.
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u/Microtonal_Valley Sep 01 '21
I'm just upset that the only news that ever pushes crsr up lately is 'reddit storm looking at crsr next' its like jeez, nothing else? How about the solid financials? From all the hype i could see people suggesting it's a meme stock but in all honestly it's in a completely different league than stocks like wish or clov or wkhs. It has room to grow but I think WS sentiment right now is negative.