Corsair Gaming Misses Q3 Earnings Expectations, Revises Outlook

Corsair Gaming, Inc. (CRSR) reported weaker-than-expected third-quarter results and missed earnings expectations. However, shares of the company jumped as high as 7.7%, before closing the day almost flat at $25.08 on November 2.

Corsair develops and and manufactures high-performance gear and technology for gamers, content creators, and PC enthusiasts.

The company’s adjusted earnings fell 70.4% year-over-year to $0.16 per share, and failed to meet analyst estimates of $0.22 per share.

Similarly, net revenue declined 14.4% year-over-year to $391.12 million, falling in line with the consensus estimate of $391.1 million. (See Insiders’ Hot Stocks on TipRanks)

Commenting on the results, CEO of Corsair, Andy Paul, said, “Corsair remains well-positioned to capitalize on the underlying secular growth trends around gaming, esports, and streaming, and we intend to continue to make investments to enhance our customer experience.”

Paul added, “We have responded to the difficult sourcing and shipping environment by building inventory in our hubs closer to our customers, but it has been difficult to pass costs on to our customers… We believe that the actual demand environment remains good and that once this difficult environment is behind us we can return to our targeted growth and profitability targets.”

Based on the current economic conditions, Corsair adjusted its full-year fiscal 2021 outlook. The company now expects FY 2021 net revenue to fall in the range of $1.825-$1.925 billion, while the consensus is pegged at $1.88 billion.

In response to Corsair’s performance, Wedbush analyst Michael Pachter lowered the price target on the stock to $34 (35.57% upside potential) from $39, while maintaining a Buy rating.  

Pachter noted that Corsair focuses on the gaming segment, creating a defensible niche for itself, unlike other large competitors. According to the analyst, there is room for significant upside to estimates if Corsair can optimize its operating leverage.

Pachter said, “While we meaningfully reduced our expectations for revenue generation and gross margins as Corsair adapts to the supply chain issues, we continue to expect long-term gross margin expansion driven by outsized growth in Corsair’s high margin peripherals businesses.”

With 3 Buys versus 3 Holds, the stock has a Moderate Buy consensus rating. The average Corsair Gaming price target of $33.83 implies 34.9% upside potential to current levels, although shares are down 27.8% year-to-date.

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