Market Sentiment Around Loss-Making Razer Inc. (HKG:1337)

Razer Inc.’s (HKG:1337): Razer Inc. designs, develops, and sells gaming hardware, software, and services under the Razer brand for gamers worldwide. With the latest financial year loss of -US$97.0m and a trailing-twelve month of -US$88.7m, the HK$11b market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is 1337’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for 1337.

View our latest analysis for Razer

According to the 3 industry analysts covering 1337, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$37m in 2021. Therefore, 1337 is expected to breakeven roughly a few months from now. How fast will 1337 have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 108% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

SEHK:1337 Past and Future Earnings, February 12th 2020
SEHK:1337 Past and Future Earnings, February 12th 2020

I’m not going to go through company-specific developments for 1337 given that this is a high-level summary, however, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I’d like to point out is that 1337 has no debt on its balance sheet, which is rare for a loss-making loss-making, growth company, which typically has high debt relative to its equity. 1337 currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are too many aspects of 1337 to cover in one brief article, but the key fundamentals for the company can all be found in one place – 1337’s company page on Simply Wall St. I’ve also put together a list of important factors you should look at:

  1. Valuation: What is 1337 worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether 1337 is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Razer’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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