Logistical issues are playing havoc with companies across all industries this year and were also partly to blame for the soft metrics delivered by Corsair Gaming (CRSR) in Q2.
The gaming peripherals specialist delivered Revenue of $473 million, $2.3 million shy of the consensus estimate. The company also missed on the bottom-line, reporting adjusted earnings of $0.36 per share – three cents below the Street’s forecast.
Aligning with the company’s stance, Wedbush’s Michael Pachter notes the “tight GPU supply in the quarter” as the reason for the revenue shortfall.
“What at first glance appeared to be lost market share in the quarter was attributed instead to supply chain issues/component shortages, which predominantly impacted Corsair’s higher -ASP products,” Pachter said. “Demand appears to have remained consistent, but Corsair was unable to fully service DIY gamers looking to build new systems or enhance existing systems in the quarter.”
As such, Pachter expects gamers – who mostly prefer to assembling new systems around the latest GPU models – will wait another quarter before resuming new builds. “Since competitors face the same issues,” Pachter opined, “We don’t see the delayed starts as lost share, but rather as a deferral of sales.”
That said, the component shortages “appear to be near normalization,” and by the end of the current quarter, the analyst anticipates a sufficient increase in supply levels to cater to the demand.
At 27.6%, gross margin remained flat year-over-year, and below Pachter’s estimate of 29.3%. The underperformance mostly down to rising freight costs, although these were “partially offset by a mix -shift toward higher -margin products.”
Looking ahead, Pachter lowered his revenue, EBITDA and EPS estimates, although the analyst sees “potential for substantial upside,” should Corsair be able to deliver operating leverage. Pachter also expects Corsair’s growth to be driven by the “relatively high margin” peripherals businesses, which should help Corsair’s margins “expand.”
One concern when mapping the road ahead for Corsair regards what Pachter calls the “unwind of the shelter-in-place trade.” Less time at home will result in less gaming activity and is the reason why Pachter lowered the price target from $55 to $45. Nevertheless, the new target still suggests shares will accumulate gains of ~60% over the coming months. Pachter’s rating remains an Outperform (i.e., Buy). (To watch Pachter’s track record, click here)
Turning now to the rest of the Street where with 2 additional Buys and one Hold, this stock achieves a Strong Buy consensus rating. With the average price target hitting $39, the analysts forecast upside of ~39% in the year ahead. (See CRSR stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
