The meme stock trend of 2021 is back in 2024 – but that’s not necessarily a good thing. Retail traders are suddenly interested in Koss (NASDAQ:KOSS) now, but have they really studied the company’s fundamentals? I doubt it, to be perfectly honest. Investors will, I believe, end up holding the bag with Koss stock if they don’t get out immediately.
Just to recap, Koss is a manufacturer of high-end headphones. If the Koss share price is much higher today than it was at the beginning of May, then there ought to be a valid reason for this.
Unfortunately, the stock-price rally is unjustifiable and only based on the meme-stock trend. So now’s the time for Koss’s shareholders to take their profits and run.
Remembering Koss Stock’s Unhappy Ending
As the old saying goes, a rising tide lifts all boats. In mid-May of this year, a popular Reddit user and meme-stock trader reemerged on social media after several years of silence. The next thing you know, retail traders staged a massive short squeeze in GameStop (NYSE:GME) stock and AMC Entertainment (NYSE:AMC) stock.
This was a miniature version of 2021’s meme-stock rally. Back in 2021, for some reason, short-squeeze traders decided to push up the Koss stock price along with the other meme stocks.
So, apparently some retail traders chose to include Koss among this year’s short-squeeze targets. Consequently, the Koss share price rallied from $2.30 at the beginning of May 2024 to around $7 before the stock pulled back somewhat.
To get an idea of what’s likely to happen this time around, just look at what took place after the meme-stock rally of early 2021. Koss stock lost a lot of value in the back half of 2021, and then declined further in 2022 and 2023. Is there any reason to believe that it’s “different this time” in 2024?
Koss’s Fundamentals Don’t Justify a Share-Price Rally
Sensible investors should be wary of meme-stock trends, especially if a company’s fundamentals are less than ideal. On that topic, Koss provides a textbook example of a short-squeeze target with serious issues.
For evidence of this, we can refer to Koss’s results for the third fiscal quarter that ended on March 31, 2024. Koss’s net sales declined 22% year over year to $2.637 million.
The fiscal picture also looks bad when we turn to the bottom-line results. Koss’s quarterly net earnings loss widened to $313,780, versus a net loss of $224,480 in the year-earlier quarter.
Worst of all, Koss incurred a net loss of $840,542 in the nine months that ended on March 31, 2024. In contrast, Koss reported net income of $8.579 million for the year-earlier nine-month period.
Koss CEO Michael J. Koss observed a “slowdown in consumer spending amid high inflation, energy and borrowing costs.” Clearly, these factors took a toll on Koss’s financials and investors shouldn’t just ignore the company’s problems.
Koss Stock: The Price Isn’t Right
The meme-stock rally of 2021 caused share prices to be fundamentally incorrect for a while. These price dislocations lured some retail investors into a bad trade, and they ended up losing money in 2022 and 2023.
This appears to be happening again in 2024, so don’t get trapped. Koss has financial issues that shouldn’t be disregarded.
Therefore, if you’re lucky enough to be profitable with Koss stock, today’s a great day to sell your shares. And if you never invested in Koss, please just stay away and look for better opportunities.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
