I have to admit that I’m not much of a gamer.
I can type 100 words a minute on a laptop, but the coordination to operate a PlayStation 4 controller just isn’t there.
I don’t have the coordination to operate a PlayStation 4 controller.
My thumbs don’t work fast enough.
But, it doesn’t stop me from trying.
When I have free time, I try to play Call of Duty with my kids. (I usually embarrass myself and get killed in the first five seconds of the game, but that’s neither here nor there.)
I, like millions of others, have turned to video games to occupy the time as COVID-19 lockdowns prevent us from going on short trips or even out to dinner.
That trend has led to fantastic growth within the gaming industry.
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A report from gaming market insider Newzoo said that the console and PC gaming market (Sony PlayStation, Microsoft Xbox, World of Warcraft, etc.) will grow 6.8% in 2020, to $45.2 billion.
The mobile gaming market (think Words With Friends and other games you play on your smartphone) will explode by 13.3% this year to $77.2 billion.
Total Global Gaming Market Expects 9.3% Growth in 2020
That growth will continue beyond this pandemic. Using Chief Investment Strategist Adam O’Dell’s six-factor Green Zone Ratings system, I’ve found a stock that will beat the rest of the market by three times in the next 12 months.
I’ll get to that in a bit.
First, I want to explore the gaming market and show you how much it will grow in the near future.
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Gaming Will Explode Beyond 2020
COVID-19 explains a large part of the growth in the gaming industry.
Lockdowns forced adults and children alike to find other uses of their time as schools and public gatherings were moved online or canceled.
As we enter the holiday shopping season, Sony Corp. (NYSE: SNE) has launched its new PlayStation 5.
Microsoft Corp. (Nasdaq: MSFT) also released its new Xbox Series S and Series X consoles.
In the first four days of their respective launches, the three consoles sold nearly 130,000 units, leaving e-commerce storefronts empty.
But even taking consoles out of the equation, Statista projects that revenue on games alone will rise from $76.5 billion in 2017 to $101.5 billion in 2025.
Video Game Sales to Rise 32% by 2025
(source: moneyandmarkets.com)
Another segment of the video game industry will grow even more: accessories, such as controllers and headsets.
Video Game Accessory Sales to Jump 38% by 2022
(source: moneyandmarkets.com)
Using Adam’s six-factor Green Zone Ratings system for stocks, I’ve pinpointed a company that will take advantage of this uptrend in the video game market and give you three times the returns of the broader market in 12 months.
It’s All About Connection
One explanation for the rise in video game sales is the ability to connect and play in real-time with other players worldwide.
As the COVID-19 pandemic keeps many indoors, it may be the only form of outside communication we have.
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For a great online gaming experience, players need to be able to talk to each other.
Enter Turtle Beach Corp. (Nasdaq: HEAR).
This California-based company develops and markets gaming headsets for various platforms. It also offers keyboards, mice and other PC accessories.
Its sales for the last 12 months were $329 million, and its trailing 12-month income is $45 million.
HEAR Stock Climbs 326% Off March Lows
(source: moneyandmarkets.com)
The company has had a great 2020 — beating Wall Street estimates for both sales and earnings per share in each of the last four quarters.
Turtle Beach Corp. Stock Rating
According to Adam’s Green Zone Ratings system, Turtle Beach scores a 99 out of 100 — meaning only 1% of all other stocks rated are higher.
(source: moneyandmarkets.com)
It rates “bullish” or “strong bullish” in five of the six factors we use to determine the overall ranking:
- Momentum — It ranks a 98 on Momentum. Its uptrend is already profound, and strong momentum stocks tend to outperform those with weak momentum.
- Growth — Turtle Beach is a high-growth stock, scoring a perfect 100 on the Growth metric.
- Quality — The company ranks a 95 on Quality. Its returns on investment, equity and assets are all better than the consumer electronics sector average.
- Value — It ranks a 97 on Value. Like its returns, Turtle Beach’s price-to-earnings, price-to-sales, price-to-cash flow and price-to-book ratios are all lower than the industry average.
- Size — With a market cap of $275 million, Turtle Beach ranks an 87 on Size. Smaller companies tend to provide bigger returns than larger ones.
The bottom line: With its overall Green Zone Rating of 99, we are “strong bullish” on Turtle Beach Corp. stock.
As the gaming industry continues to flourish, accessories will ride on the coattails of that success.
Turtle Beach is an industry leader when it comes to audio accessories for the gaming industry.
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Buying Turtle Beach stock now should set you up to beat the market by three times in the next 12 months … if not more!
Until next time…
Safe trading,
Matt Clark
Research Analyst, Money & Markets