Koss Corp (NASDAQ: KOSS) has seen a dramatic stock price spike, coinciding with Keith Gill, aka "Roaring Kitty," re-emerging on social media.
Gill's return has reignited interest in meme stocks like GameStop Corp (NYSE: GME) and AMC Entertainment Holdings Inc (NYSE: AMC), leading to significant gains for Koss.
Gill's posts suggested he holds a substantial position in GameStop, sparking retail investor enthusiasm. Following his posts, Koss's stock price surged from $2.30 to around $7 before slightly pulling back. This mirrors the 2021 meme-stock rally driven by Reddit's r/WallStreetBets.
Questionable Fundamentals
While excitement around Koss is high, its fundamentals are weak.
For third quarter ending March 31, 2024, Koss reported a 22% decline in net sales and a widened net loss of $313,780. Over nine months of fiscal 2024, Koss's net loss was $840,542, contrasting with a net income of $8.579 million the previous year.
CEO Michael J. Koss cited high inflation, energy and borrowing costs as factors impacting performance.
Charts Indicate Bullish Outlook
Despite weak financials, Koss has been buoyed by renewed meme stock interest.
Technical analysis shows a mixed picture with the stock above its 8-, 20-, and 50-day moving averages, indicating a bullish trend. However, short-term signals suggest caution. The stock's 8-day simple moving average is $4.90, just under the current price of $4.96, signaling bullish sentiments, and the 20-day SMA is $4.58, reinforcing the optimism.
The Roaring Kitty Effect: Time to Take Profits?
Given the recent surge, it might be prudent for investors to reassess their positions. Historical patterns suggest meme stock rallies often lead to significant pullbacks. Koss's fundamentals do not justify the current stock price, making it wise to consider taking profits.
While the Roaring Kitty effect has brought meme stocks into the spotlight, investors should tread carefully. Koss's financial issues and the speculative nature of meme stock rallies suggest the current surge might not be sustainable.
For current holders, it might be time to take profits. Potential investors should seek opportunities with stronger fundamentals.