Turtle Beach $HEAR is the #1 gaming console headset brand in North America, accounting for 43.4% of total market revenues in 2019.

Source: Company filings

In 2019, Turtle Beach acquired Roccat, a German manufacturer of gaming peripherals (mice, keyboards, headsets), in order to expand into the PC gaming market.

However, the company’s core business remains console headsets.

Entering the year, the company’s expectations were modest.

2020 was seen as a transition year for gaming console peripherals, leading up to the anticipated fourth quarter 2020 release of Generation 8 consoles from Microsoft Xbox and Sony PlayStation.

However, we believe that the emergence of COVID-19 and corresponding “stay-at-home” orders have meaningfully improved the company and sector outlook for 2020.

Over the past five years, Turtle Beach revenues have exhibited a correlation of 0.92 (R² of 0.85) with (U.S.) Google Trends search data for “gaming headset”.

Source: Google Trends, Bloomberg

As per the chart below, (U.S.) Google Trends data for “gaming headset” exhibits significant seasonality, peaking in the fourth quarter each year.

However, search data reached a new-all time high in the first few weeks of April.

Source: Google Trends

In the company’s first quarter earnings presentation on March 10, the company projected full-year 2020 revenues of $214 to $224 million.

At the midpoint, this would represent a year-over-year decline of 7%.

Source: Company filings

The company also provided first quarter 2020 revenue guidance of $29 to $31 million.

As a result, sell-side estimates are currently for revenues of $30 million and $28 million for Q1 2020 and Q2 2020, respectively.

This is equal to a 33/34% year-over-year decline.

Meanwhile, year-over-year (U.S.) Google Trend volume for “gaming headset” began exhibiting material growth the last several weeks, starting the week of March 15.

(For reference, sell-side estimates were last updated on March 11th, following earnings.)

Source: Google Trends

In addition, two insiders completed modest open market purchases of Turtle Beach shares in the days following earnings.

Source: Bloomberg

As a result, we believe Turtle Beach may outperform expectations in the first and second quarters of 2020, and as a result, full year 2020.

This is not a recommendation or offer to buy or sell securities.