Turtle Beach Stock Has Soared 1,110% in 2018 on Battle Royale Video Gaming Craze

I’d like to introduce readers to a company the Motley Fool has yet to cover in a full article:Turtle Beach (NASDAQ:HEAR), which is a leading maker of video gaming headsets. It’sthe only pure-play, or close to pure-play, publicly traded company in this space, and sports a market cap of $300 million.

Shares of the San Diego-based company have been moving more like a cheetah than a turtle. They’re up 1,110% in 2018 through Wednesday, versus the S&P 500’s 4.5% return,driven largely by the immense popularity of the battle royale genre of video games. (These are multiplayer games where the last person or team standing wins. In these games, headsets are particularly important for picking up audio sounds and for talking with other players when playing in teams.)

Let’s take a deep dive into Turtle Beach.

A pair of Turtle Beach's headsets lying on a flat surface.

Image source: Turtle Beach.

Turtle Beach’s corporate history: The early stage of a turnaround

In its current incarnation, Turtle Beach has been in business since 2005 — that’s when it entered the gaming headset space — and has been publicly traded since 2014. Its roots, however, date back to 1975 when Turtle Beach and Voyetra Technologies were founded. In 1996, Voyetra bought Turtle Beach and the company became Voyetra Turtle Beach (VTB).In January 2014, VTB was acquired by publicly traded Parametric Sound Corp.,which had gone public in 2010 and brought to the current company its HyperSound technology. In April of that year, the company was renamed Turtle Beach and began trading under the “HEAR” ticker.

HEAR Chart

Turtle Beach stock price. Data source:YCharts.

The company’s share price was so low recently that it risked being delisted from the Nasdaq. In order to regain compliance, Turtle Beach did a 1-for-4 reverse stock split, effective after the market close on April 6.The stock has come roaring back to life thanks largely to thecompany’s encouraging recent financial results, which are being driven by the soaring popularity of battle royale-type video games, most notably FortniteBattle Royale and PlayerUnknown’s Battlegrounds (PUBG), both of which were developed by private companies.

Turtle Beach’s business: A snap(per) shot

Under the Turtle Beach brand, the company makes a wide range of gaming headsets for use with Xbox and PlayStation consoles, aswell as with PCs and mobile devices. The “vast majority” of its sales are in North America and the U.K.,CEO Juergen Stark said in March on the fourth quarter 2017 earnings call.It’s been the market leader for gaming headsets in North America for a number of years. Here are some stats from the NPD Group showing how dominant it is in the console headset market:

In 2017, it held a 42.1% share, by revenue, of the North American console gaming headset market — more than the share of its three largest competitors combined. In Q1 2018, it held a 45.9% revenue share of this market, up 7.1% year over year.

So far in 2018, the company has “seen unprecedented industry growth … in the headset market, with Turtle Beach outpacing that industry growth by nearly 38%,” said Stark at a recent industry conference.

Turtle Beach also has a business called HyperSound, which is a directed audio technology. In October, it inked a new licensing agreement with the French company Waves System, which uses the tech in commercial applications, such as retail point of sales and museum exhibits.The company hasn’t provided financial results for this business, which would lead one to believe its revenue is likely negligible.

Turtle Beach has a number of patents on its headsets and HyperSound tech. While these are surely helpful, the company’s primary competitive advantage in its core headset business is probably itsstrong brand name.

Two young men sitting on a sofa -- one playing a console video game and wearing Turtle Beach headsets and the other cheering him on.

Image source: Turtle Beach.

Key financials

In May, Turtle Beach released robust first-quarter financial results and substantiallyincreased its full-year 2018 guidance, resulting in thestock soaring 216% for the month and tacking on about 26% so far in June through Wednesday.In the quarter, revenue surged 185% year over year to $40.9 million and gross margin more than doubled to 36.8%, from 15.4%. Net income was $2.0 million, or$0.16per share, compared to a net loss of$9.9 million, or$0.81 per share, in the year-ago period.

Management’s full-year2018 outlook is as follows:

Revenue of $205 million expected, representing an increase of 37% year over year. (Previous guidance was for revenue of $157 million.) Earnings per share (EPS) of $0.95 expected, versus aloss of$0.26 per share in 2017. (Previous guidance was for a loss of $0.12 per share.)

A secondary reason for thestock’s big rise is likely that managementhas been strengthening the company’s balance sheet. InMarch, it renegotiated its loans, extending their maturities and reducing their interest rates. It expects savings ofat least $3.5 million over the next five years from this move. In April, the company retired its Series B preferred shares “in a set of transactions that produced over $10 million of value for our stockholders,” said Stark on the Q1 earnings call.More specifically, the company retired this $19.3 million liability, which was growing at 8% per year, “at a discount of more than 50% relative to its redemption value,” CFO John Hanson noted.

At the end of the first quarter, Turtle Beach had cash and cash equivalents of $4.3 million and total debt of $34.5 million. Its financial debt-to-equity ratio (excludes the now retired liability from the Series B preferred shares) was 1.1 at that time.While the company has improved its balance sheet, it still carries a good amount of debt relative to its cash position. For some context, Switzerland-based Logitech– which makes a wide range of computer and related accessories, including gaming headsets — had no debt and $642 million in cash at the end of the most recent quarter. (Turtle Beach’s competitors are mainly private companies, so we don’t have solid comparables. Logitech is much larger than Turtle Beach, with a market cap of $7.4 billion versus Turtle Beach’s $300 million.)

Growth opportunities: Much hinges on battle royale trend

Turtle Beach’s growth potential is highly dependent upon the staying power of the battle royale gaming trend, in my opinion. While most trends do die down after the initial hoopla, there seems a solidchance that this trend will have staying power. We can expect more new games of this type to be released, and for better or worse, these games can reportedly be quite addictive. Moreover, while this trend is the company’s primary growth driver, the gaming market is expanding due to a variety of factors, including the rising popularity of esports.

Management views Turtle Beach’s top growth opportunities as:

1. International — The lion’s share of its sales are in North America and the U.K., which means there are big untapped markets — most notably China, which is the world’s largest gaming market and “virtually untapped” by the company, Stark said on the Q1 call.

2. PC gaming — The company has a stranglehold on the console headset market in North America, but this isn’t true in general of the PC gaming arena, which is particularly popular in certain geographic regions. Management views this global market as roughly the same size as the global console gaming market.

Investor takeaway

Turtle Beach stock isn’t for risk-adverse investors. For those comfortable with some risk, however, it deserves a place on your watch list. It’s benefiting from a trend that might have staying power and is reasonably valued at just 15.7 times forward earnings. The main thing to watch is the strength and longevity of the battle royale gaming trend. Also, keep an eye on the company’s balance sheet for further improvements, and the competitive landscape, which is bound to heat up.

LaSalle Hotel Properties (LHO) Expected to Post Quarterly Sales of $300.46 Million

Wall Street brokerages expect that LaSalle Hotel Properties (NYSE:LHO) will announce sales of $300.46 million for the current quarter, according to Zacks. Eight analysts have provided estimates for LaSalle Hotel Properties’ earnings. The highest sales estimate is $308.79 million and the lowest is $291.88 million. LaSalle Hotel Properties reported sales of $307.04 million in the same quarter last year, which would suggest a negative year-over-year growth rate of 2.1%. The company is scheduled to issue its next quarterly earnings results on Wednesday, July 18th.

According to Zacks, analysts expect that LaSalle Hotel Properties will report full-year sales of $1.07 billion for the current fiscal year, with estimates ranging from $1.05 billion to $1.09 billion. For the next year, analysts expect that the company will report sales of $1.09 billion per share, with estimates ranging from $1.07 billion to $1.12 billion. Zacks’ sales averages are an average based on a survey of analysts that that provide coverage for LaSalle Hotel Properties.

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LaSalle Hotel Properties (NYSE:LHO) last released its earnings results on Thursday, May 10th. The real estate investment trust reported ($0.10) earnings per share for the quarter, missing the consensus estimate of $0.27 by ($0.37). The firm had revenue of $223.00 million during the quarter, compared to analysts’ expectations of $216.67 million. LaSalle Hotel Properties had a net margin of 9.55% and a return on equity of 4.46%. The business’s revenue was down 12.3% compared to the same quarter last year. During the same quarter last year, the business earned $0.67 EPS.

A number of equities analysts recently commented on LHO shares. Stifel Nicolaus reduced their price objective on LaSalle Hotel Properties from $28.50 to $25.50 and set a “hold” rating on the stock in a research report on Wednesday, February 21st. ValuEngine downgraded LaSalle Hotel Properties from a “buy” rating to a “hold” rating in a research report on Thursday, February 22nd. Boenning Scattergood reiterated a “sell” rating on shares of LaSalle Hotel Properties in a research report on Thursday, February 22nd. Deutsche Bank reduced their price objective on LaSalle Hotel Properties from $28.00 to $24.00 and set a “hold” rating on the stock in a research report on Thursday, February 22nd. Finally, Robert W. Baird set a $27.00 price objective on LaSalle Hotel Properties and gave the stock a “hold” rating in a research report on Thursday, February 22nd. Five equities research analysts have rated the stock with a sell rating, thirteen have assigned a hold rating and two have assigned a buy rating to the company. The stock has an average rating of “Hold” and a consensus target price of $27.68.

LaSalle Hotel Properties stock traded down $0.12 during trading on Friday, reaching $34.80. 2,465,400 shares of the company were exchanged, compared to its average volume of 2,353,180. LaSalle Hotel Properties has a 52-week low of $24.10 and a 52-week high of $36.13. The company has a market cap of $3.83 billion, a price-to-earnings ratio of 14.09 and a beta of 1.15. The company has a debt-to-equity ratio of 0.46, a quick ratio of 1.87 and a current ratio of 1.87.

The firm also recently announced a quarterly dividend, which will be paid on Monday, July 16th. Shareholders of record on Friday, June 29th will be paid a dividend of $0.225 per share. The ex-dividend date is Thursday, June 28th. This represents a $0.90 annualized dividend and a yield of 2.59%. LaSalle Hotel Properties’s dividend payout ratio (DPR) is 72.87%.

A number of hedge funds have recently bought and sold shares of LHO. Assetmark Inc. lifted its holdings in LaSalle Hotel Properties by 4,082.5% during the 4th quarter. Assetmark Inc. now owns 4,057 shares of the real estate investment trust’s stock worth $114,000 after buying an additional 3,960 shares during the last quarter. Xact Kapitalforvaltning AB purchased a new stake in LaSalle Hotel Properties during the 4th quarter worth about $267,000. Elkfork Partners LLC purchased a new stake in LaSalle Hotel Properties during the 4th quarter worth about $285,000. Flinton Capital Management LLC lifted its holdings in LaSalle Hotel Properties by 29.1% during the 4th quarter. Flinton Capital Management LLC now owns 12,936 shares of the real estate investment trust’s stock worth $363,000 after buying an additional 2,912 shares during the last quarter. Finally, Daiwa Securities Group Inc. lifted its holdings in LaSalle Hotel Properties by 17.9% during the 1st quarter. Daiwa Securities Group Inc. now owns 14,500 shares of the real estate investment trust’s stock worth $421,000 after buying an additional 2,200 shares during the last quarter.

About LaSalle Hotel Properties

LaSalle Hotel Properties is a leading multi-operator real estate investment trust. The Company owns 41 properties, which are upscale, full-service hotels, totaling 10,452 guest rooms in 11 markets in seven states and the District of Columbia. The Company focuses on owning, redeveloping and repositioning upscale, full-service hotels located in urban, resort and convention markets.

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Earnings History and Estimates for LaSalle Hotel Properties (NYSE:LHO)

How Far Will Shiny Digital Tools Take Global Beverage Giants?

How might tiny companies with cutting-edge data analysis tools assist multinational beverage concerns in competing for valuable shelf space? A recent articlein Forbes notes that this year, beverage giantCoca-Cola (NYSE:KO)is replacing its system of periodic manual store shelf audits with technology from Singapore-headquartered retail analytics start-up Trax.The time-consuming manual audit system, in which field representatives physically visit stores and count bottles, can take months to return valuable information on retail inventory movement and competitor product placements.

Trax uses image recognition technology, combined with analytics and artificial intelligence, to obtain the basic data of a shelf audit while providing more comprehensive insights. Shelf images uploaded to Trax’s cloud servers are analyzed by what the company terms its “advanced computer vision algorithms,” and a monthly analytic dashboard is provided to clients.The software also provides insights into store trends within the packaged goods products that surround beverage aisles.

According to Trax’s website, it offers these services under two primary products, Shelf Pulse and Shelf Intelligence Suite. Both are enhanced with additional insights provided by global measurement specialist Nielsen Holdingsand privately held consumer goods sales and marketing agency Acosta.

Grocery aisle with soft drink bottles; blurred image effect.

Image source: Getty Images.

Tools of the type produced by Trax will help companies like Coke obtain a much faster and more complete picture of the grocery, convenience store, and club shopping channels. According to Forbes, Coca-Cola will now be able to increase the frequency of its corporate-initiated marketplace data survey, from twice a year to six times annually.

Relevance to Coca-Cola strategy

As the world’s largest beverage company has shifted its business model away from manufacturing and toward marketing, it’s embarked on a widely watched journey of portfolio diversification. Most shareholders are aware of these sea changes in the company’s business model.

However,as I discussed earlier this year, Coca-Cola is also employing three distinct tactics in the near term to improve earnings growth. First, it’s leaning toward pricing power versus selling on brute volume to improve the quality of its sales. Second, the organization is “lifting and shifting” brands between continents to spur the rate of innovation. Finally, Coca-Cola continues to roll out low-sugar variants in its sparkling beverages portfolio to meet consumer demand.

Visual intelligence can assist with each of these strategies. Coca-Cola can piece together a more complete view of competitor pricing as it adjusts its price-volume mix. It can also achieve a better understanding of local brands as it seeks to transfer winning beverages from one geographical region to another. And management can get a quicker read on how a sugar-free offering like Coke Zero, for instance, is faring as it extends across new markets.

Of course, much of this data in the future will be analyzed by the company’s bottlers as much as it will by Coca-Cola, as bottlers ultimately are responsible for shelf distribution. According to Forbes, the beverage giant is already testing Trax with a handful of its North American bottling partners, and my guess is that Coke’s global bottlers will also adopt the technology soon.

For beverage companies, getting software like Trax in the hands of bottling distributors is almost as important as management’s own use of it. Take Coca-Cola investee Monster Beverage (NASDAQ:MNST), for example. As I wrote in May, the energy drink specialist is building on its long-term potential by methodically expanding via Coca-Cola bottlers around the globe.

In some geographical regions, Monster is working with bottlers to create an energy drink shelf where one doesn’t already exist. On the company’s most recent earnings conference call, Chief Operating Officer Hilton Schlosberg provided the example of the China market:

And our bottlers — I’ve just come back from China — have set themselves an objective of focusing and trying to achieve what [we succeeded initially with] in the U.S. — to develop an energy shelf so that Chinese consumers can go to a shelf and select an energy drink. When our product is placed in a Coca-Cola cooler adjacent to a Coke and a Sprite, it doesn’t help the consumer understand what the product is.

Monster investors may be focused onnear-term issues clouding insight into the company’s margin, but you can see how over the long run, creating an energy drink category on convenience shelves in China could help create exceptional value.

Monster and its Coca-Cola bottling partners could use visual shelf technology to better understand which local brands it needs to displace to create this category in a mammoth market like China. They could also gain a view into which Chinese beverages actually complement Monster sales on the shelf, thus influencing ongoing product placement. Most importantly, Monster could theoretically get much faster data than is currently possible, on which of its innumerable energy brands is enjoying the most traction with Chinese consumers.

Of course, there’s one obvious drawback to such shiny digital tools as Trax provides. As an industry increasingly adopts the next generation of technology, any single company’s advantage in using the software gets negated. But for now, replacing the slow manual process of obtaining shelf insight with an analytics-rich dashboard should serve early adopters well in the never-ending battle for product real estate.

OPEC Meeting to Wrestle With Lingering Permian Pandemonium

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Permian infrastructure constraints have dominated the energy sector conversation on Wall Street, and with OPEC set to meet in Vienna on Friday, don’t expect this to change.

With fears of activity slowdowns in the Permian, OPEC may have to consider possible slowing U.S. shale output now more-so than ever. “The Permian region can rightfully claim the title as the single largest balancing force in oil markets today, even arguably more so than OPEC itself,” Barclays Bank Plc’s energy team said in a note to clients on Thursday entitled "Parsing the Permian Pandemonium."

Geopolitics pushed energy stocks higher earlier in the year, while lingering bottlenecks in Texas have caused some recent re-shuffling. Notably, shares of oil servicer ProPetro Holding Corp. have fallen about 21 percent over the past month, while refiner Delek US Holdings Inc., a beneficiary on Permian concerns, is only down about 1.8 percent over the same period. Goldman Sachs added the stock to its conviction buy list on Thursday.

For exploration and production stocks, investors have favored operators with exposure outside of the Permian, including Bakken-exposed Continental Resources Inc., whose shares are up about 19 percent year-to-date. During JPMorgan Chase & Co.’s energy conference this week in New York, the bank’s analysts wrote, “E&Ps leveraged to the Permian are largely maintaining their activity plans, but we did learn of select producers ‘tapping the brakes’ at the margin,” including Halcon Resources Corp. and Marathon Oil Corp.

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Signals of an OPEC supply boost in Vienna are being eyed around the world, but as Barclays noted, investors will be focused on Permian infrastructure and Permian drilling activity during second-quarter conference calls and into the fall as producers set their budgets.

Energy stocks have been weak on Thursday into the OPEC event, with the S&P 500 energy index falling as much as 2 percent.

Bitcoin Declines To 4-Month Low Amid Technical Pressure

&l;p&g;&l;img class=&q;dam-image shutterstock size-large wp-image-1113776585&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1113776585/960×0.jpg?fit=scale&q; data-height=&q;652&q; data-width=&q;960&q;&g; Bitcoin prices fell to a four-month low below $6,100. Shutterstock

The price of Bitcoin fell to its lowest in more than four months today, losing value as it&a;nbsp;suffered from technical selling.

The world&s;s largest digital currency by market value declined to as little as&a;nbsp;$6,081.09 on the CoinDesk &l;a href=&q;https://www.coindesk.com/price/&q; target=&q;_blank&q;&g;Bitcoin Price Index&l;/a&g; (BPI).

At this level, Bitcoin was at its least since February 6, and it was down more than 9% in the last 24 hours, additional BPI figures show.

&l;span&g;&l;/span&g;

The digital currency suffered this sharp decline after spending much of the last week trading with relatively tight ranges between $6,300 and $6,800.

On Wednesday, Bitcoin &l;a href=&q;https://www.forbes.com/sites/cbovaird/2018/06/20/bitcoin-marches-on-following-bithumb-hack/#5b3654d81874&q;&g;suffered&l;/a&g; a modest decline after markets responded to news that South Korean exchange Bithumb had been hacked, falling 2.6% during the day.

However, the cryptocurrency&a;nbsp;bounced back, recovering all the losses it had suffered earlier.

After mounting this recovery, Bitcoin traded within a reasonably tight range, before suffering a sharp drop today.

&l;strong&g;Bitcoin&s;s Bearish Prospects&l;/strong&g;

Going forward, Bitcoin could test additional lows, said analysts.

&q;E&l;span style=&q;font-weight: 400&q;&g;ver since BTC broke the key technical level of $7250 two weeks ago, volume has clearly favored the bears with much higher volume on down days than up days.&a;nbsp;&l;span&g;As long as the 2018 lows have held, it looks like most traders and investors are hodling,&q;&a;nbsp;&l;/span&g;&l;/span&g;&l;span style=&q;font-weight: 400&q;&g;said Jon Pearlstone, publisher of the newsletter &l;a href=&q;https://cryptopatterns.wordpress.com/&q; target=&q;_blank&q;&g;Cryptopatterns&l;/a&g;.&a;nbsp;&l;/span&g;

&q;Today&s;s move down with higher volume (again) could change that. The drop from early june has created a bear flag pattern with a target in the $5000 range and a breakdown level at $6100 which is now being tested.&q;

&l;!–donotpaginate–&g;

If Bitcoin falls below its 2018 lows, it could trigger sharp trading volume and a move toward $5,000, he added.

&l;span&g;Jeff Koyen, CEO of&a;nbsp;&l;/span&g;&l;a href=&q;http://www.360blockchaininc.com/&q; target=&q;_blank&q; rel=&q;nofollow noopener noreferrer&q; target=&q;_blank&q;&g;360 Blockchain USA&l;/a&g;, also provided a bearish point of view.

&q;&l;span style=&q;font-weight: 400&q;&g;I expect we&s;ll see more sell-offs like today&s;s plunge to $6,100,&q; he stated.&a;nbsp;&l;/span&g;

&l;span style=&q;font-weight: 400&q;&g;&q;We may even see BTC down to $5K before the bargain hunters swoop back in. I also wouldn&s;t be surprised if we hover around $5K or $6K and sit through an accumulation phase for the next couple of weeks.&q;&l;/span&g;

He noted that since summer has finally started, many investors are simply putting their portfolios &q;on autopilot.&q;

&l;strong&g;Bitcoin&s;s Elevated Price Level&l;/strong&g;

&l;span&g;Mati Greenspan, senior market analyst for social trading platform&a;nbsp;&l;/span&g;&l;a href=&q;https://www.etoro.com/&q; target=&q;_blank&q; rel=&q;nofollow noopener noreferrer&q; target=&q;_blank&q;&g;eToro&l;/a&g;, also weighed in on the situation.

Bitcoin is &q;&l;span&g;currently testing critical support at the lows of&a;nbsp;&l;/span&g;&l;span class=&q;aBn&q;&g;&l;span class=&q;aQJ&q;&g;February 6th,&q; he stated.&a;nbsp;&l;/span&g;&l;/span&g;

&l;span&g;&q;However, even if we go as low as 5k, it&s;ll still be a 100% increase over the last year.&l;/span&g;

&l;span&g;Disclosure: I own some Bitcoin, Bitcoin Cash and Ether.&l;/span&g;&l;/p&g;