Consumer Electronics

Why Oppenheimer Sees Turtle Beach Rising as Much as 200%

Turtle Beach Corp. (NASDAQ: HEAR) is a low-volume stock, and one that so far has not worked out too well for investors. There were two bits of news out on Thursday, one of which is product news, and one is a key analyst call that implies as much as 200% upside, if the analyst report proves accurate.

The company announced on Thursday that it is launching the Ear Force Recon 50 series headsets for PC and console gamers. Keep in mind that a Turtle Beach press release from September 15 said that it was launching the Ear Force Stealth 450 as a 100% fully wireless PC gaming headset featuring a DTS headphone with surround sound and “superhuman” hearing.

So, what about that analyst call with 200% upside? Oppenheimer started coverage with a report called “Coming In Loud and Clear.” The firm’s Sean McGowan initiated Turtle Beach with an Outperform rating and a $6.00 price target. Does a $6.00 target sound right for a $2.03 closing price? Because of such an aggressive small-cap stock analyst call here, 24/7 Wall St. has listed much other outside data.

Sean McGowan’s report from Oppenheimer said:

We view Turtle Beach as an attractive way to play two investment ideas — the resurgence in console video games and accompanying rise in sales of multiplayer online games, and the emergence of HyperSound, a “directed audio” technology that is on the cusp of commercialization. We see strong growth in 2016 and beyond as the transition from the prior generation of video games to the “next” generation of PlayStation and Xbox games gains momentum, and as the first consumer products employing HyperSound are shipped.

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While 24/7 Wall St. is eager to convey the report’s details here, a couple words of caution should be offered. This is a small-cap stock with less than a $100 million market cap. The company also had only $3.02 million in cash at the end of the June quarter, and Yahoo! Finance showed that its net tangible assets were at -$6.02 million, versus a total equity value of $114.5 million. Revenues were $186 million in 2014 and $178 million in 2013, but the net income applicable to shareholders was -$15.5 million in 2014 and -$6.1 million in 2013.