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Here's Why Turtle Beach (HEAR) is a Good Pick for Investors

Zacks Equity Research
·4 min read

Shares of Turtle Beach Corporation HEAR have returned 97.8% in the past year compared with 4.4% growth of the industry. Currently, the stock carries a Zacks Rank #2 (Buy) and has a VGM Score of A.

The San Diego, CA-based audio technology company has a trailing four-quarter earnings surprise of 41%, on average. The Zacks Consensus Estimate for its current-year earnings has been revised 53% upward in the past 30 days.

Key Drivers

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. ROCCAT’s expertise boosted Turtle Beach’s expansion into the $1.6-billion PC gaming headset market as well as $1.3-billion PC gaming keyboard and mouse market. 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.

The company aims to expand from being the leader in console gaming headsets into becoming a top gaming accessory brand for all platforms. It is positioned to benefit from a solid product performance combined with market share gains, supported by innovation, quality products, strong brand and retail partnerships.

Moreover, Turtle Beach’s headsets are 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. The company’s ability to significantly increase its production and delivery capacity along with gain in market share is impressive.

Recently, Turtle Beach introduced the Stealth 700 Gen 2 and Stealth 600 Gen 2, an improved version of its wireless gaming headsets designed for Xbox One and Xbox Series X as well as for PlayStation 4 and PlayStation 5. Featuring massive upgrades, the headsets have been created to continue the legacy of the two best-selling products in their price tiers, since its launch in 2017.

Strong Q2 Performance

Turtle Beach delivered earnings and revenue surprises of 44.8% and 5.5%, respectively, for the quarter ended June 2020. The performance was driven by a combination of consumer demand for headsets, strong execution that allowed it to gain market share and the ability to leverage operating expenses although it invested in new growth initiatives.

2020 Outlook

Turtle Beach raised its outlook for 2020. The company expects revenues to be around $300 million, which is more than 30% higher than the midpoint of its previous estimated range of $224-$234 million. Adjusted EBITDA is anticipated to be almost $30 million or more than 160% above the midpoint of the prior range of $9-$14 million.

Net income per share is estimated to almost 85 cents compared with the prior guidance of -22 cents to 3 cents. Adjusted net income per share is anticipated to be 80 cents compared with the earlier guidance range of -16 cents to 9 cents.

Other Decent Choices

Some other top-ranked stocks in the broader industry are Advanced Energy Industries, Inc. AEIS, Plantronics, Inc. PLT and Clearfield, Inc. CLFD, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Energy Industries has a trailing four-quarter earnings surprise of 39.1%, on average.

Plantronics has a trailing four-quarter earnings surprise of 540%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

Clearfield has a trailing four-quarter earnings surprise of 45.6%, on average. The company’s earnings topped the consensus estimate in two of the last four quarters.

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