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Shares of Corsair Gaming ( CRSR -11.85% ) were down 11.8% today, even worse than the terrible performance of the overall market. The plunge comes on the heels of yesterday’s after-hours announcement of Corsair’s first-quarter earnings release date, May 5. However, in that same press release, the company also announced preliminary unaudited financial results, which came in lower than expected.
With consumers appearing to be pulling back their spending on physical goods and venturing out of the house, it’s perhaps no wonder a gaming hardware company like Corsair is feeling the pinch.
Corsair now estimates first-quarter revenue of $380 million and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) between $14 million and $15 million. CEO Andy Paul said in a press release:
We were not expecting to show growth over the most recent Q1 2021 since that quarter contained stimulus checks and pent-up demand due to product shortages. Having said that, our Q1 2022 revenue was lower than we expected, mainly due to a short-term slowdown in consumer spending in Europe. As is now becoming generally apparent, inflation is higher than expected and the Russia and Ukraine conflict has put a strain on consumer confidence.
Revenue and EBITDA implied in the current first-quarter expectations are tracking well below the company’s initial 2022 guidance, for $1.9 billion to $2.1 billion in revenue and $205 million to $225 million in adjusted EBITDA.
Image source: Getty Images.
Corsair’s gaming hardware products are good examples of what probably won’t work in the current environment. Many people are eager to get out of the house, and high inflation is obviously hitting consumer confidence about spending on discretionary items. Therefore, the company’s ideal scenario during the pandemic, in which people had excess savings and were stuck at home, is reversing.
While it’s true that Corsair stock does look cheap after today’s slide, at just 16 times trailing earnings and a little bit over 10 times this year’s earnings estimates, those estimates may come down following this preannouncement.
Corsair may seem cheap, down 45% over the past 12 months, and could be tempting for gaming enthusiasts. However, there are lots of stocks that are down that much, and which may not have the headwinds facing Corsair. So while Corsair could make for a promising long-term buy, I wouldn’t expect a recovery in the near or medium terms.
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