Traders Buying Ahead of Turtle Beach (HEAR) Earnings?

Turtle Beach (NASDAQ: HEAR) was up over 30% on March 7, 2017, on heavy trading volume. Market participants traded over 4M shares, 12 times its average daily trading volume. Now, the last time it even broke 1M in volume was on Feb. 3, 2017. This year alone, including March 7, 2017, the stock only broke 1M in volume four times. That in mind, traders are placing their bets on HEAR to surprise earnings estimates again.

Turtle Beach shares were up 6.11% YTD, but down 16.27% over the past three months. Here’s a look at HEAR’s performance YTD.

Turtle Beach Performance

Source: TradingView

Here’s What Turtle Beach Did The Last Earnings

For the third quarter ended in September 2016, Turtle Beach reported a loss of 10 cents per share and revenues of $38.4M. This was better than the consensus estimate of a loss of 16 cents per share on revenue of $37.3M. Consequently, revenue grew 7.0% year over year.

According to Juergen Stark, CEO, Turtle Beach Corp., “The third quarter was yet again driven by strong gains in our new-gen headset portfolio, led by continued demand for our entry-level RECON series gaming headsets and initial sell-in of the STEALTH 520 wireless headset…In fact, new-gen headset sales were up 41%, highlighting the continued strength of our portfolio, considering the year-ago quarter represented a significant new-gen sell-in period.”

HEAR CEO added, “Recent NPD data confirms that we continued to increase our market share. Year-to-date, the console market is up 17% on a unit basis, while Turtle Beach is up 26%. On a retail dollar basis, the market is up 12% and we are up 14%. Given this performance, as well as our entrance into two burgeoning new markets in Virtual Reality (VR) and Livestreaming with our STEALTH 350VR and STREAM MIC products, we believe we are well-positioned to capitalize on the upcoming holiday season with the most expansive portfolio in our history…Our goal remains to get the business to net cash burn breakeven by the end of the second quarter of 2017. Ultimately, we believe this reduction will further highlight the strength of our core headset results in 2017 and beyond.”

Turtle Beach Fourth Quarter 2016 Guidance

The company issued guidance for the fourth quarter in its third quarter fiscal 2016 financial results. HEAR expects EBITDA to increase by 31% to 51%, and range between $13M and $15M. Moreover, the company, at the time, expected its fourth quarters EPS to be between 13 to 17 cents per share on revenue of $78M and $86M for the quarter ended on Dec. 31, 2016. It’s expected diluted EPS for the fourth quarter of 2016 is well above its net loss of $1.09 per diluted share during the fourth quarter of 2015.

However, Turtle Beach expects its fiscal 2016 net loss to range between $(1.87) and $(1.91) per diluted share, which is calculated based upon 48.6 million diluted shares outstanding. This would be less than its net loss of $(1.96) per diluted share in 2015.

Trend of HEAR’s Earnings

For three consecutive quarters, Turtle Beach surprised consensus estimates. For the quarter ended in December 2015, it reported an EPS of 8 cents per share, in line with the consensus estimate. However, for the fiscal quarter ended in March 2016, it reported a net loss of $(-0.26) per share, which surprised the consensus estimate by +10%. It continued to surprise analysts’ estimates thereafter. For the fiscal year ended in June 2016, its EPS surprised the consensus estimate by +4.17%. Moreover, Turtle Beach surprised the consensus estimate by 37.5% in its last quarterly earnings report.

Could Turtle Beach Surprise Again?

Here’s a look at how HEAR performed after it reported its financial results on Nov. 10, 2016:

Turtle Beach Earnings Perf

As you can see above, Turtle Beach spiked higher significantly after its earnings release, primarily attributed to its guidance and earnings surprise.

For this earnings release, market participants are anticipating this move again. If Turtle Beach guides higher and beats the consensus estimate again, look for a potential move higher in HEAR.

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