Zepp Health's Stock Surge: A Turning Point for US-listed Chinese Companies?

Zepp Health's stock has more than doubled in two weeks, forecasting 30% revenue growth in Q2, its first rise in three years. The company is transitioning from Xiaomi-branded products to its own Amazfit brand. This surge may signal a renaissance for U.S.-listed Chinese companies that have struggled on Wall Street for five years. Zepp's P/S ratio remains low at 0.46.

Zepp Health Corporation's stock has seen a remarkable surge, more than doubling in just two weeks. The wearable fitness device maker's stock has been on a rollercoaster ride, but recent developments suggest a potential turnaround. The company has forecast 30% revenue growth in the second quarter, marking its first rise in three years [2].

Zepp Health's stock performance can be attributed to its transition from selling Xiaomi-branded wearables under a licensing agreement to developing its own Amazfit brand. This shift has allowed the company to break away from Xiaomi's dominance and focus on its own products. The Amazfit brand has been gaining traction, with the company's gross margin expanding from about 25% in 2019 to 37.3% in the first quarter of 2024 [1].

The company's revenue has been on a downward trajectory since 2022, shrinking from $614 million to $183 million in 2023. However, the latest figures show a stabilization, with a mild decline of 3.6% in the first quarter of 2024. The company has attributed this recovery to the launch of two new products, the Amazfit Active 2 and the Bip 6, which have received positive reviews in the budget wearables category [2].

Zepp Health's stock is currently trading at a price-to-sales (P/S) ratio of 0.46, which is relatively low compared to other wearables companies like Garmin, with a P/S ratio of 6.4. This indicates that there is still room for significant growth for Zepp Health [2].

The surge in Zepp Health's stock may signal a broader trend for U.S.-listed Chinese companies that have struggled on Wall Street for the past five years. The recent rally in Zepp Health's stock, along with similar gains seen in other companies like So-Young, could be a sign that investors are revisiting their views on these companies [2].

Zepp Health's stock performance highlights the potential for U.S.-listed Chinese companies to rebound. The company's transition to its own brand and the positive reception of its new products suggest that Zepp Health is well-positioned for future growth. As investors continue to scrutinize these companies, there may be more opportunities for significant gains in the future.

References:
[1] http://business.inyoregister.com/inyoregister/quote?Symbol=321%3A2578295933
[2] https://www.benzinga.com/markets/equities/25/07/46339335/zepp-healths-stock-surge-a-china-renaissance-on-wall-street