Logitech vs Corsair: what’s the best action for the streaming revolution?
Video and audio streaming saw a massive increase in 2020 due to the pandemic. As people in all walks of life struggled to communicate effectively from remote locations, the demand for quality streaming equipment accelerated.
Subsequently, hardware suppliers like Logitech (NASDAQ: LOGI) and Corsair game (NASDAQ: CRSR) achieved record sales as increased demand spurred rapid adoption of each company’s product portfolio.
But now, as economies around the world reopen, the sustainability of the growth of both companies is in question. Let’s take a look at both companies and see which one looks set for a brighter future.
Corsair Gaming is a leading brand in the esports industry. The company manufactures and supplies high-performance gear and equipment ranging from high-end gaming PCs to smaller streamer-oriented components like headsets and lighting.
Over the past decade, content sharing platforms like Twitch and YouTube have spawned an era of competitive gamers who can make money by streaming their content live. While this may sound like a niche market, it isn’t. For reference, the 2019 League of Legends World Championship had more viewers than the most recent Super Bowl.
With this increase in the popularity of esports, more and more casual gamers are becoming competitive gamers as they aspire to monetize their existing habits. This has resulted in continued growth in Corsair’s sales. In 2020, the company generated net sales of $ 1.7 billion, an increase of 55% from the previous year.
But it’s not just favorable industry winds that are helping Corsair. By relentlessly focusing on quality engineering, the company has become the number one brand among its competitors. In fact, Corsair says it can sell most of its gaming components and systems for a significant premium over the average non-Corsair product.
With all signs pointing to a continued increase in the esports market as a whole, Corsair should also reap the benefits as it holds the # 1 position in the industry market.
Unlike Corsair, Logitech does not build a PC itself but focuses exclusively on peripheral products such as microphones, mice, cameras, and keyboards. While there is still some product overlap between the two companies, Logitech’s sales aren’t coming from gamers alone.
In fact, one group that has quickly adopted Logitech’s products is the telecommuters. Over the past year or so, Logitech has experienced robust growth thanks to the dramatic increase in video calling. Sales of the company’s video collaboration products grew 186% in the last year alone and now represent nearly 20% of all revenue. Essentially, if there is a device that can be used to enhance digital communication, Logitech is selling it. And in 2020, these products were needed.
In the last fiscal year, Logitech generated revenue of $ 5.25 billion, an increase of 76% from the previous year. The company also improved profitability, as its operating cash margin doubled from 14% to 28%.
But Logitech CEO Bracken Darrell doesn’t seem to see this as just a temporary boost. On the company’s last conference call, Darrell said, “Some of the behaviors that have formed during the pandemic are clearly going to continue.” To instill more confidence, the company authorized a $ 1 billion share buyback program in the last quarter, a significant increase from the $ 250 million program already in place.
What future looks brighter?
While both companies should benefit from a world with increased digital communication, Corsair’s future appears to be a bit more predictable.
Logitech’s business relies heavily on a home-based workforce, and it’s unclear how that will shake up. The uncertainty is reflected in the company’s own forecast: it is currently forecasting stable revenue – plus or minus 5% in 2021.
On the flip side, while esports has seen accelerated adoption with more people stuck at home during the pandemic, the underlying trends are still promising in the long run. Statista estimates that esports revenue could increase by more than 40% by 2024.
While Logitech would benefit from this tailwind as well, it is very sensitive to the future of remote working. From this perspective, Corsair appears to be the safest value for the moment.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.