For highflying videogame stocks amid the Covid-19 pandemic, anything short of a blowout, it seems, leads to red ink on the company’s stock chart.
In its fourth-quarter results reported early Tuesday, Corsair Gaming (ticker: CRSR) handily beat consensus estimates, issued an outlook for this year that topped analyst models, and said that it would be selling even more videogame peripherals had it not been constrained by its available supplies—something of a good problem to have.
It wasn’t enough for investors, who now appear to expect quarterly results that smash expectations. Corsair stock was falling 4.4%, to $43.96, in recent trading. The S&P 500 was flat.
“Corsair continued to be supply-limited for most of Q4 in almost every category,” CEO Andy Paul said in a conference call. “In other words, our sales could have been substantially higher and we could have manufactured and shipped more products.”
Corsair reported adjusted earnings of 45 cents a share on sales of $556.3 million. The consensus estimate was for adjusted earnings of 43 cents a share and sales of $530.3 million. Corsair said it expects full-year 2021 revenue of $1.8 billion to $1.95 billion, when analysts had expected revenue of $1.71 billion.
Paul said Corsair managed to begin refilling retail shelves toward the end of the fourth quarter, and that the first half of 2021 would be strong compared with other years. But Corsair expects that as people return to activities unavailable during government-ordered lockdowns around the world, the company’s growth would moderate in the second half of the year.
Paul argues, however, that the peripherals his company sells for videogame streaming are more central than they have ever been before.
“In December, we saw YouTube reveal that they had 40 million gaming channels, a number that was far higher than most industry watchers have been estimating,” Paul said. “This underscores our thesis that streaming and sharing video content is becoming a way of life for millennials in the same way as playing videogames has become.”
Other recent trends are here to stay too. As Paul has told Barron’s in the past, and Corsair reiterated Tuesday, the company is observing an increased demand for parts typically related to people building expensive videogame computers themselves.
“It’s not just people rushing out buying a gaming headset, it’s people getting pretty committed to gaming and building expensive gaming PCs,” Paul said, adding that he thinks people who build expensive computers will be more likely to buy peripherals from Corsair in the future.
All that component buying has led to Corsair selling out of its inventory through most of 2020, and Paul said he expects that to continue in the first half of this year. Demand, he said, has pushed semiconductor lead times to at least 20 weeks, and in some cases 40 of 50 weeks, which requires much more preplanning.
Of the 11 analysts that cover the stock 10 rate it a Buy, and one has a Hold rating on the name. Corsair went public at $17 a share in September and has more than doubled since.
Write to Max A. Cherney at [email protected]
