Wedbush: Turtle Beach Continues To Benefit From Rise Of Battle Royale Gaming

Turtle Beach Corp. HEAR has seen substantial market growth and market share gains, while improved operations have bolstered earnings, according to Wedbush.

The Analyst

Analyst Michael Pachter reiterated an Outperform rating on Turtle Beach with a $42 price target.

The Thesis

Turtle Beach raised its third-quarter revenue guidance from $65 million to a range of $73 to $74 million and lifted its projected earnings per share from 44 cents to 74 cents, Pachter said in the upgrade note. (See his track record here.)

The headset and sound card manufacturer has continued to benefit from battle royale-style gaming, as the use of headsets improves the gaming experience, the analyst said.

“Additionally, we think Turtle Beach headsets are ideal for holiday gift-giving for 'Fornite' players, as well as replacing/upgrading around major October game launches from 'Call of Duty' and 'Red Dead Redemption,' and 'Battlefield V' in November. In our view, this positions Turtle Beach to surpass its previously implied Q4 guidance.”

Turtle Beach has over 45 percent market share in the $1-billion global gaming headset market, according to company data, and Pachter said he expects another 5-percent market share gain in 2019.

“While management is currently focused on entering into the PC gaming headset market in North America and Europe, then later expanding into China, there is also the opportunity of entering the gaming keyboards and mice markets.”

These are likely moves over the next two years as Turtle Beach pays off its remaining debt and has cash to spend, the analyst said.