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Razer Inc.'s (HKG:1337) Shift From Loss To Profit

Simply Wall St

Razer Inc.'s (HKG:1337): Razer Inc. designs, develops, and sells gaming hardware, software, and services under the Razer brand for gamers worldwide. With the latest financial year loss of -US$97.0m and a trailing-twelve month of -US$88.7m, the HK$13b market-cap alleviates its loss by moving closer towards its target of breakeven. As path to profitability is the topic on 1337’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for 1337.

Check out our latest analysis for Razer

1337 is bordering on breakeven, according to the 2 Tech analysts. They expect the company to post a final loss in 2020, before turning a profit of US$46m in 2021. So, 1337 is predicted to breakeven approximately 2 years from now. What rate will 1337 have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 111%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

SEHK:1337 Past and Future Earnings, October 30th 2019

Given this is a high-level overview, I won’t go into details of 1337’s upcoming projects, however, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. 1337 currently has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which typically has high debt relative to its equity. 1337 currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are too many aspects of 1337 to cover in one brief article, but the key fundamentals for the company can all be found in one place – 1337’s company page on Simply Wall St. I’ve also compiled a list of key factors you should further research:

  1. Valuation: What is 1337 worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether 1337 is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Razer’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.