Sell-Side Likes Turtle Beach Earnings, Future In Battle Royale World

Wall Street analysts continue to like gaming headset maker Turtle Beach Corp HEAR, even as investors were selling the stock Thursday morning following a first-quarter revenue and earnings beat.

Analysts acknowledge an expected 2019 revenue drop after a big 2018, but say the large and growing market of gamers playing multiplayer “battle royale” games isn’t going away and will boost the company in the long run.

Turtle Beach reported earnings of 9 cents per share, ahead of the 6-cent Street estimate. Revenue in the quarter was up nearly 10 percent year-over-year to $44.8 million, beating estimates by nearly $3 million, and well ahead of management’s initial guidance.

'Extremely Encouraged'

D.A. Davidson analyst Tom Forte continues to see opportunities for full-year sales upside from more games being offered on a “freemium” basis, where players play for free, but can buy in-game upgrades. Forte also sees upside on a faster refresh cycle. Management looks good too, he said.

“We are extremely encouraged by the top-line and bottom-line beat,” Forte wrote in a note. “This further emphasizes our confidence in Turtle Beach’s management's ability to execute its strategy.”

Forte reiterated a Buy rating on Turtle Beach and increased the price target from $23 to $26.

Related Link: Turtle Beach Sells 30 Million Headsets, DA Davidson Says Guidance Remains 'Ultra Conservative'

Battle Royale More Than A Fad

Wedbush analyst Michael Pachter remains bullish because Turtle Beach headsets have for years been favored by gamers in multiplayer games, known as battle royale games. But now those multiplayer games are the rage, and that’s not changing soon.

“We continue to view Battle Royale as far more than a fad, and think it will last for many years,” Pachter wrote. “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.”

Pachter also likes Turtle Beach’s recent acquisition of German PC accessories company ROCCAT, which gives Turtle Beach the chance to expand its product reach and its presence internationally.

Pachter is keeping an Outperform rating on the stock, but lowered the price target from $22 to $20.

Price Action

Turtle Beach stock ran up after the earnings beat Wednesday but was giving some gains. Shares were down more than 6 percent to $10.13 at time of publication.

Photo courtesy of Turtle Beach.