Stock Analysis

Corsair Gaming's (NASDAQ:CRSR) Supply Chain Problems are Creating Buying Opportunities

  •  Updated
Source: Shutterstock

Corsair Gaming, Inc. (NASDAQ: CRSR) is in the spotlight today after trimming the 2021 revenue guidance.

The stock slipped as much as 8% halfway through the trading session, yet the reason for a weaker outlook is one of the most common problems you'll hear these days – global logistics and supply chain issues.

However, this dip might provide a buying opportunity for a patient investor, as our intrinsic value model is ringing alarm bells.

See our latest analysis for Corsair Gaming

Once Again, Supply Chain Woes

CEO Andy Paul reflected on the situation, estimating the downward revision in net revenue due to supply chain issues to be at least 10%.

In particular, he singled out the lack of affordable graphics processing units (GPUs) in the retail channel. The guidance has been lowered to a range of US$1.825b-1.925b, from US$1.9b-2.1b.

The company is set to release the Q3 earnings on November 2, 2021.

A question to answer is whether Corsair Gaming's current trading price of US$25 is reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy?

What is Corsair Gaming worth?

According to our data, the stock is significantly undervalued at the moment. However, discounted cash flow model is not without limitations.

For more information, check on our discounted cash flow valuation of Corsair Gaming. Click the "View Data" box to get the full equation breakdown.

NasdaqGS: CRSR Discounted Cash Flow October 15, 2021

We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 16.45x is currently trading slightly below its industry peers' ratio of 20.28x, which means if you buy Corsair Gaming today, you'd be paying a reasonable price for it.

And if you believe that Corsair Gaming should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers.

Furthermore, it seems like Corsair Gaming's share price is relatively stable, which means there may be fewer chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the broader market, given its low beta.

What kind of growth will Corsair Gaming generate?

NasdaqGS: CRSR Earnings and Revenue Growth October 15, 2021

Investors looking for growth in their portfolio may want to consider a company's prospects before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.

Corsair Gaming's earnings over the next few years are expected to increase by 64%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Corsair Gaming just lowered the guidance, blaming one of the most common issues in the world today - supply chain problems. But, the long-term positive outlook stays intact.

Are you a shareholder? It seems like the market has already priced in CRSR's positive outlook, with shares trading around industry price multiples. However, there are also other essential factors that we haven't considered today, such as the company's financial strength. Have these factors changed since the last time you looked at CRSR? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you've been keeping an eye on CRSR, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CRSR, which means it's worth diving deeper into other factors such as the strength of its balance sheet to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Corsair Gaming at this point. In terms of investment risks, we've identified 2 warning signs with Corsair Gaming, and understanding them should be part of your investment process.

If you are no longer interested in Corsair Gaming, you can use our free platform to see our list of over 50 other stocks with high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether Corsair Gaming is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Stjepan Kalinic

Stjepan Kalinic

Stjepan is a writer and an analyst covering equity markets. As a former multi-asset analyst, he prefers to look beyond the surface and uncover ideas that might not be on retail investors' radar. You can find his research all over the internet, including Simply Wall St News, Yahoo Finance, Benzinga, Vincent, and Barron's.

About NasdaqGS:CRSR

Corsair Gaming

Corsair Gaming, Inc., together with its subsidiaries, designs, markets, and distributes gaming and streaming peripherals, components and systems in the Americas, Europe, the Middle East, and the Asia Pacific.

Adequate balance sheet with reasonable growth potential.