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Oppenheimer raises Turtle Beach price target on headset demand from video gaming space

The analysts reiterated an Outperform rating on the San Diego headset maker, citing 'long-term growth' opportunity
Video game players
Analysts say Turtle Beach has 'many tailwinds' from popular video games like Fortnite and PUBG

Oppenheimer analysts raised their price target for the San Diego gaming headset and audio accessory company Turtle Beach Corp. (NASDAQ:HEAR) to US$31 from US$12 citing “many tailwinds” in the video game space.

The analysts reiterated an Outperform rating on Turtle Beach and told clients the gaming headset maker offered a “long-term growth” opportunity.

“We've talked for many quarters about how key trends in video game are favorable to Turtle Beach-esports, streaming, and the rise of multi-player games — each calls for more headsets sales. Hardcore gamers have known this; Fortnite and PUBG proved to the casual gamers that headsets are necessary to excel in games,” wrote Oppenheimer analysts Andrew Uerkwitz and Martin Yang in a research note released Monday.

“We increase our 2018 estimates above guidance as we see these trends picking up speed as we head into the back half of the year … We recognize valuation is becoming rich, but with continued balance sheet improvements and favorable market trends, we reiterate our Outperform rating,” they added.

READ: Turtle Beach 1Q earnings beat the Street on strong headset revenue, shares soar

The analysts said Turtle Beach was “fully turned around” and “readying for long-term growth.”

“The company has many tailwinds in the video game space and we believe a premium multiple is warranted. We raise our target to $31,” wrote the analysts.

Investment thesis

The analysts viewed Turtle Beach as an attractive way to play two investment ideas.

“First, the resurgence in video games and the accompanying rise in multiplayer online games, and second, HyperSound, a "directed audio" technology on the cusp of commercialization. We predict stable growth in 2018. This primarily reflects bullish video game industry expectations,” wrote Uerkwitz and Yang.

Turtle Beach has called out two particular games, Fortnite and PUBG, as the primary driver behind revenue growth.

“We believe these games are continuing to do extremely well. Moreover, retail is focusing on peripherals as sources of growth, which should help near-term sell-in,” wrote the analysts.

Shares in Turtle Beach dropped 7.5% to US$26.54 amid a broader pullback in the tech-laden Nasdaq.

Contact Uttara Choudhury at [email protected]
Follow her on Twitter: @UttaraProactive

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