Turtle Beach (HEAR – Free Report) is a $260 million maker of headphones for gamers whose stock exploded higher this year after surprising investors and analysts with big sales and profit growth.
In fact, its sales this year are expected to grow 78% and exceed its market cap, giving it a very attractive price-to-sales valuation of under 1.0.
This growth is coming from the newest craze in the $138 billion global gaming market known as “battle royale” where as many as 100 online opponents play last-man-standing fantasy combat simulations.
The most popular games in this realm are Fortnite, Players Unknown Battleground (PUBG for short) and Activision‘s (ATVI – Free Report) Call of Duty. And where Turtle Beach comes in is with high-tech headphones that can hear in 360 surround-sound. Gamers crave this advanced technology — in styles, sophistication and price ranges from $25 to $250 — because it’s the only way to hear one’s opponents sneaking up on them.
Profit Estimates Move Higher
Two weeks ago the maker of must-have high-tech gaming headsets pre-announced Q3 results slated for November 6.
On Wednesday 10/11, Turtle Beach raised its Q3 guidance for revenue to $73–74 million from $65 million previously, for adjusted EBITDA to $17 million from $11 million previously, and for EPS to $0.74–0.78 from $0.44 previously.
Accordingly, analysts responded by raising the Zacks Q3 EPS consensus 64% from $0.47 to $0.77. And that’s why HEAR is a Zacks #1 Rank Strong Buy again this year.
Wedbush analysts, who have a $42 price target on HEAR shares, think that Turtle Beach headsets will be a hot holiday gift for gamers. And they see a trend of upgrading around major October game launches like Call of Duty and Red Dead Redemption produced by Rockstar Games, a unit of Take-Two Interactive(TTWO – Free Report).
And November brings the much anticipated Battlefield V from Electronic Arts (EA – Free Report). In the Wedbush view, this positions Turtle Beach to surpass its previously implied Q4 guidance.
