Sound And Fury Over Guidance, But Wedbush Says Turtle Beach Still In The Game

While Turtle Beach Corp HEAR has been winning in the battle for gaming headset sales, its stock was getting pummeled Friday after weaker-than-expected guidance.

Shares in the headset maker dropped more than 18 percent despite a reporting a fourth-quarter earnings beat and announcing it's expanding beyond headsets to the market for keyboards and mice with the $19.2-million acquisition of German PC accessories company ROCCAT.

At least one sell side analyst was advising investors to stay in the game, though, despite the market carnage.

The Analyst

Wedbush analyst Michael Pachter reiterated an Outperform rating on Turtle Beach and raised the 12-month price target from $22 to $30.

The Thesis

Pachter said that Wedbush likes the business and applauds Turtle Beach management for using excess cash to pay debt and for its acquisition of ROCCAT.

Pachter also likes the ROCCAT acquisition, which accelerates Turtle Beach’s broadening accessories business and gives it additional international distribution prospects in Asia.

The analyst also noted the strength of the underlying demand for the headsets – the multiplayer games known as Battle Royale games, like the online gaming sensation "Fortnite," that require players to use headsets to communicate with other players.

“We continue to view Battle Royale as far more than a fad, and think it will last for many years,” Pachter wrote in a note. “Turtle Beach has ridden the wave of Battle Royale popularity, but the company’s core products have been favored by gamers playing multiplayer games for most of this decade. Turtle Beach is the favored brand among console gamers, and as we see an uptick in multiplayer and Battle Royale gaming, the company should continue to gain share.”

Price Action

Turtle Beach's stock was down 18.5 percent Friday afternoon at $13.23 per share.

Related Links:

Turtle Beach Falls On Earnings Beat, Lower Guidance, ROCCAT Acquisition

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

Photo courtesy of Turtle Beach.