Prior to January, there was only moderate attention surrounding stereo headphones and related accessories maker Koss (NASDAQ:KOSS). Hardly anyone could have imagined that the trading volume of KOSS stock would skyrocket like it did.
Famously, KOSS stock holders got caught up in a major drama that involved a group of online trading rebels. For a while, Koss’s fundamentals mattered less than the sentiment and hype.
Sentiment can change like the wind, however. And it didn’t take long before the euphoria gave way to a reality check. Thus, KOSS stock came down as quickly as it went up.
There’s a lesson here for stock-price chasers, no doubt. Yet, there may also be a prime buying opportunity as KOSS stock still represents a solid company with excellent growth potential.
KOSS Stock at a Glance
From 2014 until a couple of months ago, KOSS stock was a penny stock — defined by the U.S. Securities and Exchange Commission (SEC) as a stock that trades under $5 per share.
Finally, on Jan. 25 of this year, KOSS stock broke through the long-standing $5 barrier. That undoubtedly felt like a major milestone for the shareholders, but the biggest price moves were yet to come.
Without much warning, KOSS stock hurtled to a 52-week high of $127.45 on Jan. 28 but then lost nearly half of its value on that same day. The following day, KOSS shot back up to a 52-week high of $105.40 before losing approximately half of its value again.
The following days weren’t great for the KOSS stock bulls. As of Feb. 9, KOSS shares were priced at around $18. That’s brutal for anyone who chased the stock near its peak price.
On the other hand, there may be a prime opportunity here for anyone who chose to sidestep the roller coaster. So if you were waiting for KOSS stock trade to trade at a more favorable price point, here’s your chance to get in.
The Reddit Drama
You’ve probably heard about the now-famous message board platform Reddit. There, you can find a sub-group (or subreddit) called r/WallStreetBets, which launched certain stocks into the stratosphere.
Amazingly, the r/WallStreetBets users were collectively able to short-squeeze institutional investors like Citron Research and Melvin Capital out of their positions on some stocks.
The most widely covered example of this is GameStop (NYSE:GME) stock. Even the non-financial media have caught on to the David-versus-Goliath story of the r/WallStreetBets users apparently beating the short sellers at their own game.
That said, less-widely covered is the evident short squeeze in KOSS stock. This stock has been identified as a Reddit short squeeze target, and unfortunately some latecomers bought the shares at the worst possible time.
This just goes to show that it’s difficult to properly time an entry into a massive short squeeze. And if you don’t get it just right, you could lose money very quickly.
Focus on the Basics
Instead of trying to time a short squeeze perfectly, informed investors can focus on how well a company is doing financially.
So, let’s get back to the basics and see if Koss — as a company rather than a stock — deserves investors’ attention.
Koss is an audio equipment company that’s mostly known for selling headphones. And the most recently reported quarterly fiscal results suggest that Koss sold lots of those headphones.
To be more specific, Koss reported second-quarter earnings of $509 million, which translates to 7 cents per share.
That’s a substantial improvement over the net loss of $216,000, equivalent to 3 cents per share, posted during the second quarter of the previous year.
Not only that, but Koss’s sales increased by 18% to $4.2 billion. To account for this, the company cited continued demand from people who were working or studying from home during the novel coronavirus pandemic.
The Takeaway
Overall, ignoring the drama and focusing on the basics can yield surprisingly good results.
KOSS stock holders have endured plenty of drama lately. Now, however, it appears that the hype phase has passed.
This means that prospective investors can focus on the company’s fundamentals. And on that front, Koss is doing just fine.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
