Koss Corporation (NASDAQ:KOSS) has been one of the higher-profile Reddit stocks. Despite the cred of having released the world’s first stereo headphones (back in 1958), KOSS stock has been left far behind in the industry.
Apple (NASDAQ:AAPL), relative newcomer to the headphones market, absolutely dominates these days. After that, are several dozen premium audio brands. Hundreds of no-name Chinese companies compete for the scraps. Along with Koss. The company reported sales of under $5 million in its latest quarter. Yet, somehow, KOSS stock shot up to close with a 480% gain in a single day in January.
In February, I wrote that there was nothing to see here, just Reddit traders unleashing a little market mayhem. As expected, KOSS stock quickly slumped, giving back most of those gains. However, in recent weeks, shares in the company rallied. They are still volatile — KOSS lost 6% on Monday, for example — but even after that drop, they are trading near $22. That’s over 1,600% higher than they went for just 12 months ago.
Is it possible that shares in this unassuming headphone maker could actually turn into a growth investment?
Could History Repeat?
For most of the past five years KOSS shares have been worth around $2. There were a few minor blips, like nearly hitting the $4 level for a short time in 2018, and a few months as a penny stock early in 2020. However, looking back further, there was a period where KOSS was a certified growth stock. From the start of 2001 to early 2006, Koss shares were on an upward trajectory. By the time they closed above $14 in January 2006, they had gained a respectable 270% or so over five years.
The interesting thing about that timeline is that it happens to coincide with Apple’s release of the iPod. That kicked off a resurgence in music popularity, as well as demand for earbuds and headphones. Apple supplied a set of white earbuds with each purchase, but they were easily lost or damaged.
Fast forward to today. With streaming music on everyone’s smartphone, and headphone jacks a thing of the past, wireless earbuds and headphones are wildly popular. Apple dominates that business. Its AirPods were estimated to have generated $6 billion in revenue in 2019 alone. This year, the company went after the premium headphone market with the $549 AirPods Max.
In its most recent quarter, Koss reported sales of $4.9 million (most of that headphones and earbuds), up 18.4% year-over-year. Two things to take away from that. One, Apple makes far more money selling AirPods in one day than Koss generates in revenue for a quarter.
That’s not what I’m focused on, though. I’m looking at the fact that Koss saw its sales rise appreciably. People working from home are helping to boost headphone sales, but AirPods have kicked off a wave of popularity in wireless earbuds. Not everyone can afford AirPods, and not everyone wants AirPods.
That means we could be going into another period similar to 2001-2006, where Koss is able to fill a niche. It doesn’t have to actually compete against Apple. If the company can keep expanding its headphones and earbud offerings by taking advantage of demand for less expensive options, it could keep growing its sales. That could kick off another growth phase for KOSS stock.
Bottom Line on Koss Stock
I still can’t shake the suspicion that the real winners of this episode will end up being Koss family members and company executives. They collectively cashed in over $44 million in shares when KOSS stock unexpectedly surged.
However, it’s just possible that Koss could once again find itself riding Apple’s coattails to a period of greater sales. If that were to happen, it’s also not unconceivable that KOSS stock could see another period of growth.
Also worth nothing is the fact that KOSS earns an “A” rating in Portfolio Grader. The company may not be flashy, but it is debt-free (a $507,000 PPP loan was forgiven in 2020), and currently it’s profitable.
I’m not convinced that KOSS stock at around $22 is at the point where it is something I’d want to move quickly on. Even if it is down 66% from its January (and all-time) high. But as it stabilizes, it’s worth keeping an eye on. Once KOSS finds its new baseline, there is a case to be made for long-term growth potential.
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.
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