Koss (NASDAQ:KOSS) is getting most of its attention these days as a so-called Reddit meme stock. KOSS stock is one of those seeing wild price fluctuations and heavy trading volume after being championed on the Reddit discussion board r/WallStreetBets.
The whipsaw action may be entertaining from afar, even as it’s likely nerve-wracking for people holding KOSS stock. But it’s also important to recognize that Koss is more than a meme stock.
It’s a profitable company that has become an under-the-radar pandemic stock due to people working from home.
Koss stock has a “B” grade in my Portfolio Grader and is coming off a solid earnings report. Let’s take a closer look at this Milwaukee-based company.
Koss Is Old School
The first thing to know about Koss is that it’s been around for decades. The company was founded more than 60 years ago, in 1958. Its first big product was the SP/3 Stereophone – the world’s first stereo headphones.
By 1969 Koss headphones were so popular and considered so essential that they were installed on the presidential aircraft, Air Force One.
It’s been innovating ever since and now produces a line of stereo products, including headphones, buds, ear clips and cordless headphones.
While it’s not the biggest and best headphone maker in the world today – arguably, that title now belongs to Apple (NASDAQ:AAPL) — Koss has managed to hold on to a slim place in the headphone space.
It now also sells portable Bluetooth speakers and a line of classical music CDs played by American orchestras. It sells to consumers and its products are made available to schools and prisons through distributors.
KOSS Stock at a Glance
The stock price in KOSS doesn’t look anything like an old-school company this year, thanks to Reddit traders. Koss stock was at penny stock levels earlier this year, trading for around $3 per share. But when the r/WallStreetBets frenzy hit, Koss was one of those who went “to the moon” as a WallStreetBets trader would gleefully say.
KOSS stock jumped to $58 per share in late January (a gain of $1,580%). Then it topped that a few days later, rising to $105 and registering a gain of 1,760.
Within just a couple of days, however, the air went out of the balloon. Koss stock was all the way down to $12 just a few days ago before another Reddit-inspired rally started pushing the stock price higher again.
Today, Koss is at more than $21, which is still a 525% gain from Jan. 1. That’s more than a respectable return.
In fact, you can hardly blame Koss family members, who own about 75% of the stock, for cashing in and taking profits. According to SEC filings, members of the family sold $31 million in stock as the price moved higher.
Add executives and members of the board of directors and stock sales at the inflated prices rise to $44 million.
To put that into perspective, Koss had a total market value of about $26 million before the stock price jumped. It was an amazing windfall for Koss family members and corporate executives.
Koss reported its fiscal second-quarter earnings on Jan. 28. Revenue came in at $4.93 million, which was an increase of 18.4% on a year-over-year basis. Net income was $509,000, which was an improvement over the $216,000 loss the company suffered in the previous year.
Notably, the company had a $506,700 Paycheck Protection Program loan in the quarter that was forgiven. That helped the bottom line.
The Bottom Line
Koss will likely never be a major player in the headphone market again. Companies like Apple are too strong for Koss to make significant inroads.
But headphones and personal listening devices are more important than ever these days as people are working from home and going to school remotely. Anyone who is in the same room or same apartment with someone else is going to want to use headphones, buds or ear clips so they can hear what’s going on in whatever virtual meeting or class they are watching.
The Reddit roller coaster in KOSS stock will come to an end sooner rather than later. In the meantime, it will be a stomach-churning ride.
On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article was long AAPL stock. The staff member did not hold (either directly or indirectly) any other 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.