Video game accessory maker Turtle Beach (NYSE: HEAR), headquartered in San Diego, saw its stock climb by about 10 percent — prompting investors of all stripes to take a closer look and it’s potential down the line. They are correct to do so. Let’s explore why that is.
The recent uptick in Turtle Beach’s stock price is partially attributed to news recently reported by GameStop. GameStop’s holiday sales show a revenue drop of about 5% from the year prior. However, GameStop enjoyed nearly a 30% increase in gaming headset and controller sales. This is good news for Turtle Beach as the company specializes in such gaming accessories. Both companies’ stocks jumped on the news. The only caveat to consider from an investing perspective is the fact that gamers can now buy games online, reducing the number of visits to GameStop and subsequently reducing Turtle Beach sales at some point down the line.
To say Turtle Beach’s stock is volatile would be an egregious understatement. If you are looking for a stable investment with minimal volatility, look elsewhere. Turtle Beach share prices have climbed about 700% in a year alone. However, the stock price also dipped 40% lower than it had in the six months prior. Part of the problem is the company’s lack of diversity in terms of gaming accessory offerings. Turtle Beach’s fate is currently tied to a handful of popular games players enjoy with Turtle Beach headsets, controllers, etc.
In particular, Battle Royale style games such as the insanely popular Fortnite shooter game are especially important to the company’s success. The good news is games these types of games (PlayerUnknown’s Battle Grounds and Fortnite) are some of the most popular titles on the market. However, investors question how long Turtle Beach can continue to sell accessories for a limited number of games. Furthermore, if games like Fortnite and PlayerUnknown’s Battlegrounds dip in popularity, Turtle Beach sales will inevitably suffer. Though there is certainly reason to worry about Turtle Beach’s lack of product diversity, the silver lining is GameStop’s latest financial reports indicate unrelenting demand for gaming headsets. Every experienced gamer will testify Battle Royale style games have thrived since the early days of the industry. Games in the shooting genre have been and always will be popular. Shooting-oriented games require constant communication with teammates as battles are played out over the web. Therefore, it is illogical to assume Turtle Beach’s headsets and other accessories will have minimal demand in the years ahead.
Turtle Beach dazzled the Street with its latest financial results. Sales have doubled on a year-over-year basis thanks to the company’s global presence. Turtle Beach’s spike in sales has allowed it to pay off all of its debt. It was only last March when these debts were amended to keep Turtle Beach in business. At the moment, the stock’s market cap is about $230 million. This is quite the figure for a company that was once drowning in debt with a market value below $6 million. Perhaps most importantly, Turtle Beach is capturing a larger portion of the market share. The company’s share of the gaming headset market in the United States and Canada is around the 45% mark. This is an impressive figure considering the company had a 40% market share a little over a year ago.
All in all, Turtle Beach shares increased an incredible 687% in 2018 alone. Few investors are willing to fork over their hard-earned money on a stock that has skyrocketed nearly seven-fold in such a short period of time. There is no reason to believe the games that require products similar to those offered by Turtle Beach will dissipate in popularity in the near future. Online gaming is becoming that much more popular with each passing day. Players require reliable headsets with clear microphone transmissions to enjoy these collaborative games to the fullest.
Investors should consider a stake in Turtle Beach at the current price. The average gamer’s is about 35 years of age. These fairly young consumers are more than willing to use their limited free time playing games rather than watching TV. Turtle Beach is poised to capitalize on this trend. Add Turtle Beach to your portfolio and you will likely make money.