KOSS - Here's why the Koss Corporation stock price is surging

2024-06-06 21:04:00 ET

Koss Corporation (NASDAQ: KOSS) stock price has gone parabolic in the past few weeks, making it one of the top-performing companies in Wall Street. It initially surged to a high of $6.96 in May, a 205% increase from its lowest swing this year. It has now soared by almost 30% from its lowest point this month, giving it a market cap of over $44 million.

Koss Corporation shares have soared because of the ongoing meme stock frenzy in Wall Street. The return of animal spirits has pushed most meme stocks to their highest levels in months. GameStop has jumped to almost $50, giving it a market cap of over $14 billion. This is a significant valuation for a company that is in a dying business.

Koss Corporation is seen as a meme stock because of its performance in 2021. At the time, the stock soared from $10.5 to $393 million within weeks, pushing its market cap to over $30 billion. And like most similar companies, its stock plummeted after the frenzy ended.

Koss, a manufacturer of headphones, has been facing significant existential risks in the past few years as its growth ended and profits narrowed. Its revenue crashed from over $21.8 million in 2019 to over $13.1 million in the last financial year.

Koss stock chart

This trend has continued this year. The most recent financial results showed that its net sales in the last quarter came in at $2.6 million, a 22% drop from the same period in 2023. It also recorded a big net loss of over $313k.

The company attributed this drop to the slowdown in consumer spending in the United States and in Europe. It also faced higher margins and logistical challenges during the quarter. ]

I believe that Koss Corporation faces many challenges ahead. Competition from the likes of Apple and Samsung has risen. Also, most headphone buyers tend to do more research online before buying. As a result, they might buy products from smaller brands that have cheaper prices and better ratings.

The other challenge is that many people stay a long time with their headphones, removing the need for regular upgrades.

Therefore, as we saw in the last meme stock frenzy, I suspect that the Koss stock price will turn around and drop in the coming months. If this happens, the stock will drop and retest the support at $4.

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