Corsair Gaming Stock Falls After Downgrade. Valuation Is the Issue.

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Corsair Gaming

stock plummeted nearly 15{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} after Cowen analyst Doug Creutz downgraded the maker of videogame accessories, citing its lofty valuation.

His view, published in a research note on Wednesday, makes some sense. The company (ticker: CRSR), long known for its power supplies and computer memory designed for high-performance videogame PCs, went public in September at $17 a share. The stock closed Tuesday at $40.23—more than double its listing price.

Shares peaked at $51.26 last week, and were trading around $34 during Wednesday’s regular session.

All that means the stock is no longer trading at a discount to its large rival

Logitech International

(LOGI), which also makes videogame accessories, among other products. Creutz wrote that using an adjusted measure of profitability, Corsair is more expensive than the other videogame stocks his team covers.

Still, he said, Corsair remains a strong company, and that he hasn’t changed his view on the executives that run it, or the underlying business. He raised his target for the share price to $37 from $32.

Esports and videogame streaming still stand to benefit the company in the long run. They drive sales from PC players, who tend to spend more money on videogame peripherals.

At the same time, the stock is a way to take advantage of trends in the videogame sector without buying shares in a publisher. Those stocks have risks related to the success or failure of various titles, though less so than they once did, Creutz said.

Like other videogame businesses, Corsair has benefited from the stay-at-home orders resulting from the Covid-19 pandemic. On Monday, the company raised its forecasts for sales and earnings for the full year. Management said it now expects full-year revenue of $1.65 billion to $1.67 billion, above prior consensus estimates.

Eleven analysts cover Corsair stock. Creutz rates it at Hold, while the others say it is a Buy, The average target for the stock price is $36.65, which suggests a potential gain of roughly 7{a38ddb2ded6b05e28c8ae73a8db0e271c21f7193684bd9e4e28acae292f81d99} from the level at midday on Wednesday.

Write to Max A. Cherney at [email protected]