Corsair Gaming (CRSR) IPO – Analysis

Corsair Gaming intends to go IPO shortly, and this is a chance for many people associated with the brand to get in on the action and support the company’s growth.

The Decision in a Nutshell

Corsair is an excellent buy over the short term. However, with economic instability and a lingering bad feeling between the US and China, it’s uncertain how long Corsair will remain a dominant force in the industry.

Why Corsair?

It’s fine to suggest that Corsair will be an excellent purchase on IPO, but why would you buy it? If you’re someone who has a finger on the pulse of custom PC builds, Corsair Gaming is a brand that’s no stranger to you. For those who don’t follow the shifts in that particular market, it may come as a surprise how extensive Corsair’s reach into these markets is. The company is well-known for its brand of PC peripherals, but it has also acquired other smaller enterprises in recent years. One of its most notable acquisitions is the streamer-centric brand Elgato. While they haven’t branched out to selling replacement windows online, their hardware has been a breath of fresh air for custom PC builders.

The company was founded in 1994 to be an OEM supplier for cache modules. In 2002, the company expanded into the consumer market, offering memory kits for overclocking CPUs. The company attempted an IPO in 2012 but withdrew before the shares could be issued, citing uncertainty in the market. It seems they are more confident this time around since they have moved forward with acquiring partners to assist in launching their shares. Whether this optimism should be shared over the long term is something only time will tell.

According to Reuters, Corsair relayed its intention to either sell or go IPO in February, after getting into partnership with Goldman-Sachs, Credit-Suisse Group AG, and Barclay’s Plc. It seems as though the company decided that an IPO offering was a much better way to go. PC Gamer reports that the company will deliver its IPO shortly, with gamers having a chance to finally own a portion of the company they already invest so heavily in.

The Breakdown

Is Corsair a good buy? Based on the initial analysis of the prospectus, Corsair Gaming might be a good buy, although long-term holding of the stock might not be such a good idea. The reputation that Corsair has in the PC market shouldn’t be overlooked. At first offering, the chances are that the stock will rise significantly, as IPOs tend to do. However, the staying power of the company might be in question.

In the SEC Prospectus, Corsair notes that their success relies on the introduction and success of new GPU and CPU elements alongside cutting-edge games. It’s safe to assume that these hardware elements will continue to make an impact and that game developers will try to push the boundaries of the current hardware. Under these assumptions, and the idea that Corsair will continue to be a recognizable name in the industry, buying and holding their common stock may be a good idea.

If the economic slowdown from current events impacts the company, then the share price may initially rise then plummet. Continued problems between the US and China may lead to lower production by Corsair, which may impact its bottom line. At current, there are no indications that this is the case, but the possibility does exist. Investors intending to buy and hold the shares should be aware of the potential risks associated with Corsair’s business model.

The Ups and Downs of a Hardware Giant

Corsair shouldn’t fall on the list of stocks you buy and hold over the long term. Prospects suggest that the company may be in for a pretty sizable fourth quarter. The recent shelter-in-place orders have seen the market for video games expand rapidly. Forbes mentions that sales for video games smashed the previous record in the second quarter of 2020. If this trend continues, Corsair may continue to post appreciation up to the first half of 2021. Beyond that is anyone’s guess.

The Final Word

Corsair has the potential to be a massive brand. The $100M IPO offers the company a solid capital base for further growth. If the company decides to expand into new markets to diversify its position in the electronics market, the share price may continue to rise for some time. If, however, Corsair decides to use the new capital to shore up its existing markets and prepare for a shrinking economy, we may see the share price dive soon after the initial spike. Buying and holding with CRSR is a risky strategy, but based on future market conditions, it may be lucrative