Turtle Beach Earnings Preview: Setting Up For A Short Squeeze?

One of the hottest stocks in the market in 2018 is set to report second-quarter earnings after Monday's market close, and there are a lot of dynamics in play.

Analysts are expecting huge growth numbers from audio equipment company Turtle Beach Corp HEAR, and the large number of short sellers betting against the stock could add major fuel to the fire.

What To Expect

Analysts are expecting Turtle Beach to report an earnings per share loss of 2 cents, up from a 56-cent loss a year ago. Analysts are also calling for second-quarter revenue to grow to $47.9 million, up a whopping 150.6 percent.

Explosive growth in online gaming, particularly in battle royal-style games such as “Fortnite,” has created a sales boom for Turtle Beach and driven its stock higher by an incredible 1,590 percent year-to-date.

Update: Turtle Beach Q2 EPS $0.40 Beats $(0.02) Estimate, Sales $60.8M Beat $47.9M Estimate. Company Sees Q3 EPS $0.44 vs $(0.04) Est., Sales $65M vs $38.29M Est.

Battle Royale Winner

“'Fortnite' and 'Pub G' started taking off and that has brought in a bunch of new gamers," Turtle Beach CEO Juergen Stark told Benzinga back in May. “The underlying market is doing well and we are doing way better than the overall market."

Those gains have also attracted the attention of short sellers.

According to shortsqueeze.com, there are more than 3.4 million Turtle Beach shares held short representing and exceptionally high 38.9 percent of the stock’s total float. Even after the stock’s meteoric gains this year, that large outstanding short position could trigger a major short squeeze if Turtle Beach can meet or exceed earnings expectations Monday.

Analyst Take

Wedbush analyst Alicia Reese is among the optimists. Reese is calling for an earnings beat and guidance raise.

“We think the company is poised for continued growth driven by the expansion of Battle Royale-style games and new gamers entering the market, which should drive console and PC gaming headset sales,” Reese said in an Aug. 2 note.

Wedbush has an Outperform rating and $31 price target for Turtle Beach stock.

Shares traded around $30.98 at time of publication, down 4 percent on the day.

Related Links:

4 Reasons Why 'Fortnite' Has Won Over Gamers

The Success Of 'Fortnite' Is Driving Massive Gaming Headset Sales