Here's Why Turtle Beach (HEAR) is a Solid Bet for Investors
Shares of Turtle Beach Corporation HEAR have returned 87.7% compared with 6.1% growth of the industry in the past three months. The stock currently sports a Zacks Rank #1 (Strong Buy) and a VGM Score of A.
The San Diego, CA-based audio technology company has a trailing four-quarter positive earnings surprise of 46.4%, on average. The Zacks Consensus Estimate for its current-year earnings has been revised as much as 102.5% upward in the past 30 days.
What Works for Turtle Beach
Turtle Beach is a leading gaming audio and accessory brand that offers a wide range of cutting-edge gaming headsets. In 2019, the company acquired ROCCAT, a German PC peripherals maker, for $15.6 million in cash. This was a masterstroke.
ROCCAT’s expertise has accelerated Turtle Beach’s expansion into the $1.6-billion PC gaming headset market, and $1.3-billion PC gaming keyboard and mice market. Also, the enhanced distribution channels across North America, Europe and Asia enabled Turtle Beach to offer its lineup of products to more gamers around the world.
Turtle Beach aims to expand from being the leader in console gaming headsets into becoming a top gaming accessory brand for all platforms. It is well placed to benefit from a solid product performance combined with market share gains, led by innovation, quality products, strong brand and retail partnerships.
Growth to Continue
During the March quarter, Turtle Beach saw strong demand for its products including record-setting retail sales, which drove results that exceeded management’s expectations across all key financial metrics. The company’s headsets are also well suited for learning and working remotely via video or audio conferencing, resulting from the COVID-19 situation.
The combination of increased gaming activity, distance learning and work-from-home trends should continue to drive higher demand for headsets. Meanwhile, Turtle Beach’s ability to obtain greater capacity for both manufacturing and shipping along with increase in market share is noteworthy.
According to the NPD Group, an American market research company, Turtle Beach’s retail sales in April 2020 were more than double the brand’s prior all-time high from April 2018. The latest data shows that all seven top-selling headsets and eight of the top-10 best-selling headsets are from Turtle Beach. The company’s Recon 70 for Xbox One is the best-selling gaming headset by units so far in 2020. And Turtle Beach’s Stealth 600 for Xbox One continues to be the number one headset in terms of revenues.
Thanks to its attractive products, Turtle Beach has raised its outlook for 2020. The company anticipates revenues to be between $224 million and $234 million compared with the prior guidance of $214-$224 million. Adjusted EBITDA is expected to range between $9 million and $14 million compared with the previous range of $5-$10 million.
Turtle Beach has several growth drivers in place and enjoys a strong foothold in its served markets. It is rational to believe that HEAR has more upside left.
Other Key Picks
Some other top-ranked stocks in the broader industry are Ooma, Inc. OOMA, Acacia Communications, Inc. ACIA and Chegg, Inc. CHGG, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ooma has a trailing four-quarter positive earnings surprise of 228.2%, on average.
Acacia has a trailing four-quarter positive earnings surprise of 17.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Chegg has a trailing four-quarter positive earnings surprise of 49.9%, on average.
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