Shares of headphone company Koss (KOSS 3.89%) soared on Friday. At one point during the trading day, shares were up more than 150%. As of 1 p.m. EST, however, the stock is up 93%.
The tech stock's gain follows the company's fiscal second-quarter earnings release, which featured strong sales growth and a swing from a loss in the year-ago quarter to a profit. But shares are also likely trading higher because the stock is a short-squeeze play as part of a popular recent trading trend started on Reddit.
Koss reported fiscal second-quarter revenue of $4.9 million, up 18% from $4.2 million in the year-ago period. Net income for the period was $509,000. This compares with a net loss of $216,000 in the year-ago period. Net income, however, was helped by a $506,700 Paycheck Protection Program (PPP) loan that was forgiven during the quarter and recorded as income.
"The increase in net sales for the quarter and first six months has been across several markets with US distributors, European distributors and domestic direct to consumer sales leading the way," explained CEO Michael Koss in the company's third-quarter update. "We continue to see sales driven by the continuation of people studying and working from home. Sales through domestic retail were down for the quarter and year to date periods."
Meanwhile, Koss stock is likely benefiting from recent trading trends of investors on subreddit r/WallStreetBets -- a group of traders who are trying to buy up shares of small companies with high short interest, forcing investors who are short the stock to buy shares in order to cover their short position (a short squeeze).
Investors should keep in mind that if this recent trading trend proves to be short-lived, it's possible that the stock could take a breather and fall sharply. Further, investors should look to future quarterly updates to see how sustainable growing demand from people working and studying from home is.
Editor's note: A previous version of this article mistakenly referred to quarterly revenue in billions instead of millions. The author regrets this error.