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Logitech vs. Corsair: Which Is the Best Stock for the Streaming Revolution?

The Motley Fool logo The Motley Fool 6/12/2021 Ryan Henderson
Logitech vs. Corsair: Which Is the Best Stock for the Streaming Revolution? © Provided by The Motley Fool Logitech vs. Corsair: Which Is the Best Stock for the Streaming Revolution?

Streaming video and audio saw a massive rise in 2020 due to the pandemic. As people in all fields strove to communicate effectively from remote locations, the demand for quality streaming equipment picked up.

Subsequently, hardware suppliers like Logitech (NASDAQ: LOGI) and Corsair Gaming (NASDAQ: CRSR) saw record sales as the increased demand spurred quick adoption of each company's portfolio of products.

But now, as economies around the globe reopen, the sustainability of both companies' growth is in question. Let's take a look at both businesses and see which one looks poised for a brighter future. 

a man sitting in a chair in front of a computer: Teen looks at a large monitor while speaking into a microphone. © Getty Images Teen looks at a large monitor while speaking into a microphone.

Corsair Gaming

Corsair Gaming is a premier brand in the esports industry. The company manufactures and supplies high-performance gear and equipment ranging from top-of-the-line gaming PCs to smaller streamer-oriented components like headsets and lighting. 

Over the last decade, content-sharing platforms like Twitch and YouTube have given rise to an era of competitive gamers that can make money by live-streaming their content. While this might sound like a niche market, it's not. For reference, the 2019 League of Legends World Championship had more viewers than the most recent Super Bowl. 

With this rise in the popularity of esports, more and more casual gamers are becoming competitive ones as they aspire to monetize their existing habits. This has meant consistent growth in sales for Corsair. In 2020, the company delivered $1.7 billion in net revenue -- a 55% increase from the year prior.

But it's not just industry tailwinds that are helping Corsair. By relentlessly focusing on quality engineering, the company has evolved into the premier brand among its competitors. In fact, Corsair says that it can sell most of its gaming components and systems for a significant premium compared to the average non-Corsair product.

With all signs pointing to a continuing rise in the esports market at large, Corsair should reap the benefits as well since it boasts the No. 1 market share position across the industry.

Logitech 

Unlike Corsair, Logitech doesn't build any PCs itself but instead focuses exclusively on peripheral products such as microphones, mice, cameras, and keyboards. While there's still some product overlap between the two companies, Logitech's sales come from more than just gamers. 

In fact, one group that has been quick to adopt Logitech's products is remote workers. Over the last year or so, Logitech has seen robust growth thanks to the dramatic increase in video calls. The company's sales from video collaboration products increased 186% over the last year alone and now account for almost 20% of all revenue. Essentially, if there's a device that can be used to enhance digital communication, Logitech sells it. And in 2020, those products were needed. 

In the latest fiscal year, Logitech generated revenue of $5.25 billion -- a 76% increase versus the year prior. The company delivered improved profitability as well, with its operating cash flow margin doubling from 14% to 28%. 

But Logitech's CEO Bracken Darrell doesn't appear to see this as simply a temporary boost. On the company's latest conference call, Darrell stated, "Some of the behaviors that were formed during the pandemic are clearly going to endure." To instill further confidence, the company authorized a $1 billion share buyback program in the latest quarter -- a sizable increase from the $250 million program that was already in place.

Which future looks brighter?

While both companies stand to benefit from a world with increased digital communication, Corsair's future appears to be a little more predictable.

Logitech's business relies heavily on an at-home workforce, and it's unclear how that will shake out. The uncertainty is reflected in the company's own guidance: It's currently projecting revenue to be flat -- plus or minus 5% in 2021.

On the flip side, although esports may have seen accelerated adoption with more people stuck at home during the pandemic, the underlying trends are still promising in the long term. Statista estimates that revenue from esports could grow by more than 40% by 2024.

While Logitech would also benefit from this tailwind, it's highly susceptible to the future of remote work. With this in mind, Corsair appears to be the safer bet for the time being.

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Ryan Henderson has no position in any of the stocks mentioned. The Motley Fool recommends Logitech International. The Motley Fool has a disclosure policy.

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