Are Razer shares worth buying?

• Razer (HK: 1337) share price falls to HK1.85 per share
• It played down the impact of ending its e-wallet service
• As revenue soared, Razer returned to profitability in H1 2021
• Analysts see a potential 84% upside on the stock
• Keen to trade Razer shares? Open an account with us to start trading now.

Razer stock price: what’s the latest?

Shares of Singaporean startup Razer, which primarily makes consumer electronics and gaming hardware such as laptops, tumbled 2.1% to close at HK1.85 on Thursday. About 15.7 million shares changed hands.

Razer’s encouraging half-year results had helped lift the stock price briefly, but news of its e-wallet shutdown subsequently weighed on the share performance.

Year-to-date, the Hong Kong-listed counter has fallen nearly 28%.

As of Thursday morning, all six analysts covering the stock recommended ‘buy’, and eyed an average 12-month target price of HK$3.41, Bloomberg data showed. That implied a potential upside of 84% based on Thursday’s closing price.

Credit Suisse’s research team on Wednesday gave an ‘outperform’ rating and a HK$3.25 target, while HSBC suggested ‘buy’ and targeted HK$3.00 per share.

Why did Razer exit the e-wallet scene?

The gaming hardware and software manufacturer, dual-headquartered in California and Singapore, told the 1.1 million users of Razer Pay that the group would end the e-wallet service at the end of September 2021.

Nikkei reported that the withdrawal ‘comes as the high costs of customer acquisition weigh on operators’.

Lee Li Meng, Razer’s head of fintech, said the e-wallet business involved ‘a huge amount of’ cash burn, especially in Southeast Asia. He added that the service’s closure will only have a small impact on revenue.

Razer plans to narrow its focus to business-to-business digital payments.

Zennon Kapron from fintech research firm Kapronasia opined that persuading existing Razer users and new users to use the e-wallet service ‘would have been incredibly challenging and expensive, especially as gaming doesn’t naturally tie into spending money…in a convenience store or buying groceries online’.

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Razer swings to profitability in 1H 2021

On Wednesday, Razer reported revenue climbed 68% year-on-year to a record US$752 million for the first six months of 2021.

The hardware arm’s revenue jumped 77% to US$677.3 million, while new gaming growth categories gained further market share, such as in broadcast and gaming chairs.

Net profit totalled US$31.3 million, reversing from a net loss of US$17.7 million in the year-ago period. This was boosted by the revenue surge, continued increase in gross margin, and improved productivity.

The company said it expects strong revenue growth for 2021 amid new hardware product introductions and growth of its software user base.

It will also amp up investments for growth, such as by reinvesting part of its full-year profits into high-potential areas like Razer Fintech and its virtual-credits service Razer Gold, as well as step-up investments in new growth opportunities.

‘Such investments will involve additional spending in operational expenses as we scale our services business,’ Razer said.