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Corsair Stock: Is It a Long-Term Opportunity?

The gaming computer hardware company has announced a revenue target of $3.5 billion by 2026. But is CRSR a good investment for the long term?

Despite its name, Corsair Gaming  (CRSR) - Get Corsair Gaming, Inc. Report doesn't manufacture video games or host online betting events. Instead, it's a company that designs and sells computer hardware and peripherals especially for gamers. Think flash drives, keyboards, power supplies, and memory modules.

In the past year, Corsair has been trending on Reddit threads, mainly because — although the stock has decent fundamentals and a valuation below its peers — it has generated a lot of short interest.

In 2021, CRSR stock lost more than 40% while under attack from short sellers. But Corsair's management expects the company to see significant growth in the long term.

During the company's 2022 Virtual Investor Day presentation, Corsair announced ambitious financial targets. In particular, management believes revenue will hit $3.5 in the next five years.

Let's look into how Corsair could potentially reward investors with significant gains in 2022.

Figure 1: Corsair Stock: Is It a Long-Term Opportunity?

Figure 1: Corsair Stock: Is It a Long-Term Opportunity?

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Corsair's Revenue Forecast

Corsair is currently the market leader in gaming components, excluding memory, with a solid 42% of market share. Through its Elgato brand, content creation products have been the company's main growth driver. They accounted for a third of revenue from the company's Gamer and Creator Peripheral divisions last year.

Still, the company has plans to expand growth in other categories, such as pre-built gaming PCs, streaming cameras, and gaming monitors.

Ahead of its quarterly earnings call, Corsair revealed that it expects net revenue for 2021 to be approximately $1.9 billion. That's at the higher end of its previous guidance range of $1.825 billion to $1.925 billion.

This indicates that Corsair will beat Wall Street's expectations, considering that the consensus expects revenue of $1.88 billion for the year.

Looking further ahead, for 2022, Corsair expects net revenue to be in the range of $1.9 billion to $2.1 billion. That may not be mega-aggressive, but it's not bad.

Figure 2: Corsair guidance for 2021 and 2022.

Figure 2: Corsair guidance for 2021 and 2022.

Why 2021 Was a Bad Year for CRSR

Corsair has been suffering from several headwinds since last year. Combined, they caused CRSR to lose more than 40% of its share price in 2021.

At the same time, according to Yahoo Finance, shorts account for more than 36% of its float.

What caused this bad performance for Corsair stock?

For one thing, the gaming hardware business is hotly competitive. Corsair focuses mostly on consumer sales, while competitors like Logitech  (LOGI) - Get Logitech International S.A. Report and Dell Technologies  (DELL) - Get Dell Technologies Inc Class C Report also have healthy business-to-business (B2B) sales.

Also, Corsair's business is priced based largely on its growth potential. The company's long term-success depends on the development of new products, which has lagged behind those of its competitors.

Finally, supply-chain disruptions helped dampen Corsair's business in 2021, as it did for many tech stocks.

Investors Should Focus on the Long Term

Thanks to its decent fundamentals, CRSR has a strong buy rating from the Wall Street consensus. Experts have set an average price target of $34, which would represent an upside of more than 60% by the end of the year.

Looking at its valuations, it appears that CRSR is undervalued. In February 2021, the stock had a price-to-earnings (P/E) ratio of 30 times. Today, its P/E ratio stands at 13, while the average P/E ratio in the gaming industry is 25.

In addition, the global gaming market is expected to reach $257 billion by 2025. That makes Corsair's earnings multiple appear to be not overly stretched.

Thanks to CRSR becoming a short-selling target, bulls could benefit from a possible short squeeze, as well as the company's strong business fundamentals.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)