After closing ~77% higher yesterday, Eargo, Inc. (EAR) shares are up another 60% in today’s trading session as investors cheered the U.S. Food and Drug Administration’s (FDA) new rule on hearing aids.
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The new FDA rule is set to make over-the-counter (OTC) hearing aids accessible to ~30 million adults who could benefit from the devices, and Eargo, which manufactures hearings aids, stands to benefit in a big way.
The new ruling sets up a new category of OTC hearing aids, and customers can directly buy aids via physical or online retail without any requirement of a medical examination, prescription, or fitting adjustment. The move could also lower the costs of hearing aids for customers.
While Congress had passed legislation asking the FDA to create a category for OTC hearing aids in 2017, the historic move yesterday came after the current U.S. Administration’s Executive Order for promoting competition in the U.S. economy that had set a 120-day deadline for timely action from the FDA.
A Change of Fortunes Could be in the Cards for Eargo
The new rule could be a game changer for Eargo, which saw its revenue dwindle from $69.1 million in 2020 to $32.1 million in 2021. During this period, its net loss widened from $30 million in 2020 to $157.8 million in 2021.
Earlier this month, the company’s second-quarter numbers had failed to impress investors after its revenue dropped 68.3% over the prior year to $7.25 million and net loss per share more than doubled to $0.78 from $0.36 a year ago. During the quarter, the company shipped 4,455 gross systems versus 12,548 systems a year ago.
Is Eargo a Good Stock to Buy?
While analysts are yet to cover Eargo, investors are jumping in on the action. Our data dive at TipRanks indicates that the number of investor portfolios on TipRanks that hold Eargo has increased by 3.3% in the last 30 days.
In addition, the price jump yesterday came on a trading volume of 53.82 million shares, while the company has about 39.4 million shares outstanding, implying decisive investor exuberance. More impressively, today’s volume is over 90 million shares as of 11:10 AM EST.
Conclusion: Eargo to Benefit from the New Rule
Eargo, on its part, is pursuing an omnichannel growth strategy and expanding its physical retail presence. As the new rule makes hearing aids more accessible to consumers, this strategy could bear fruit for the company, going forward.
