E-Sports has taken Pop Culture by storm but is it here to stay?
If you’ve heard of Fortnite, Player Unknown’s Battle Ground (PUB G), or perhaps have heard your teenage neighbor screaming late at night chances are it’s because of gaming headset companies like Turtle Beach, Hyper X, or Logitech. Headsets enable players to interact with teammates and to hear in-game sounds like footsteps clearer. E-Sports has taken off especially this recent year because of the popular battle royal games mentioned above. This is becoming a ubiquitous trend among young people who have just turned into gamers.
We’ve seen recent waves of teenage behavior like this, where they copy what their friends are doing in Snapchat. Now, the new wave may be E-Sports. According to the Chicago Tribune, parents of kids age 10 to 16 have witnessed their kids get sucked into the life of video games. This parent put it best, “Over the last two months, “Fortnite” has developed a grip so tight on the kids in our neighborhood that I have heard several parents discuss starting a support group for our little video game junkies.”
Video Game Streaming outlets like Youtube and Twitch are hubs fanatics flock to for entertainment. Not only has playing the games become a pop culture trend, but viewing other people play also has. That has translated into companies like SG BTV investing in 16% of all shares outstanding or $54 million worth. This may be an ominous sign as to not invest in Turtle Beach as one firm owns more than 10%. Investment firms, BlackRock Inc and Morgan Stanley, own $9 million and $8 million worth of shares each respectively roughly 3% each out of shares outstanding. (Info was taken from Form 13D and 13F).
However, given the consumer demand especially in Q4 and the continued rise of the E-Sports industry, getting in while shares are cheap can prove as a risky but potentially rewarding investment. Turtle Beach stock has seen high growth in share price over the trailing twelve months and it’s particularly due to the demand for headsets. I chose to research their financial statements and get a better glimpse of their growth in revenue Q/Q as well as forward guidance from the company. With total revenue for 2018 expected to have grown 81.3% and coming off of their best performing quarter, the company is growing at an incredible pace. Lastly, revenue is also expected to have almost doubled from 2017 and my estimates are that it will come in at around 265 million vs 149.1 million the year prior.
In addition, I did some quick Scuttlebutt method work and went into a Microsoft Store in downtown San Francisco as well as a Gamestop in San Jose. My findings from the SF Microsoft store were interesting. In what could be a strategic move from Turtle Beach, the only headphones that Microsoft sold in the store were from Turtle Beach. No Hyper X or Logitech were on the shelves. I asked a retail associate what’s the deal with the headphones, which ones were the best in his opinion etc. He said that he could not tell which was better in terms of quality but did mention that Hyper X were the headsets used in the tournaments they had in the store which was pretty cool. So 2 thumbs up for Turtle Beach. Moreover, my friend who worked at Gamestop told me they’re always sold out.
My findings here are that despite not being known for in tournament use, they are one of the most popular headsets on the market. In a recent earnings call, CEO Juergen Stark, mentioned it was the company’s highest quarter in the history of growth. My personal thoughts are that revenue and net income will rise significantly in quarter 4 due to the holiday bump.
*I personally own 55 shares of the company.
Are you a turtle or a bull on Turtle Beach stock?