The maker of low-end wearable devices reported its revenue rose 78.5% in the third quarter, but forecast the rate would ease to about 40% in the current quarter
Key Takeaways:
Zepp Health reported a second consecutive quarter of strong revenue growth in the three months to September, as it achieved breakeven on an adjusted operating basis
The maker of fitness wearables is inching back towards profitability after ditching its former reliance on Xiaomi to develop its own Amazfit brand
Meme stock or serious player in the global wearables market?
That’s the big question hanging over Zepp Health Corp. (NYSE:ZEPP), whose stock has soared by more than 10 times since July as investors discovered the company in the bargain bin of the global market for wearable fitness devices. Zepp announced its latest quarterly results on Tuesday, which included very strong revenue growth as its Amazfit-brand products found a comfortable place at the low end of the market.
While some might argue the company’s stock run-up of the last four months looks highly speculative, akin to the GameStop (GME.US) meme-stock phenomenon of 2021, the big share gain in this case looks more sustainable in our view. Here, we should also point out that the stock has actually lost 40% of its value from a multi-year peak in September.
Even after all those ups and downs, Zepp’s stock still trades at a relatively modest price-to-sales (P/S) ratio of just 3.98. That’s just over half the 7.39 ratio for Garmin (GMIN.US), Zepp’s only major publicly traded competitor. That seems to show that the recent run-up is more a reflection of the fact that Zepp was previously extremely undervalued, and that the stock is just now being discovered by investors.
Interestingly, the stock has yet to be discovered by the analyst community. Only one analyst polled by Yahoo Finance covers the company, and participants on its latest earnings call were all from small houses with names like Fundamental Research Corp. and Point72 HK. We expect that could change next …
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