Turtle Beach Stock: Intriguing Speculative Play Right Now?

The $16 level appears to be stepping up as support

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Turtle Beach Corporation (NASDAQ:HEAR) is a small market cap company that focuses on the manufacturing of gaming accessories. Turtle Beach produces gaming headsets for gaming consoles like the Xbox One, PlayStation 4, PC, Nintendo Switch, and mobile devices, and exploded in popularity at the peak of the "Fortnite" craze of 2018. However, it's deeper than that; company's history dates back to the 1970s at which time Turtle Beach developed various audio software packages and audio devices.

On its last earning report back in November, Turtle Beach reported an increase in revenue by 141% quarter-over-quarter and its net income significantly up to $17.8 million. In fact, Turtle Beach stock has outperformed earnings expectations on five-straight earnings reports. Most recently, in that same November earnings report, Turtle Beach stock reported an earnings per share of $1.04 which beat Wall Street's expectations by a significant $0.57.

Turtle Beach stock rode that post-earnings momentum to a Nov. 6 two-year high of $22.94, and is now up 130% year-to-date. After spending most of the spring and summer carving out a channel of higher highs, the shares have formed an extended bull flag pattern above the $16 area. 

The good news for options traders is that Turtle Beach premium is affordably priced at the moment. The equity’s Schaeffer’s Volatility Index (SVI) of 68% stands in the low 14th  percentile of its annual range. This means options players are pricing in relatively low volatility expectations at the moment.

HEAR Stock Chart

Turtle Beach stock as an outstanding price-to-earnings ratio of 8.32. The price-to-earnings ratio demonstrates what the market is currently willing to pay for HEAR based on its past or future earnings. However, that number should be anticipated to increase to a figure closer to HEAR's forward price-to-earnings ratio of 21.74.

Furthermore, HEAR looks to be on a path focused on growth. Turtle Beach has seen a few inconsistent years in terms of its revenue growth, but has doubled its sales since 2016 at the end of the day. Turtle Beach has also done extremely well as it pertains to the company's bottom line; it's gone from taking net losses of $87 million back in 2016 to now producing nearly $43 million in profit this year.

HEAR appears to be a very interesting, but speculative, play for investors willing to dabble with the red-hot small caps of 2020.

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