Why Eargo (EAR) Stock Is Up & Will It Continue?

Eargo Inc (NASDAQ: EAR) is having an incredibly strong day in the market today, but if you’re looking for news, you’re not going to find anything. The most recent news surrounded the launch of the company’s Eargo 6 hearing aid, but that was two days ago and the announcement didn’t do much to move the stock. 

So, what’s the deal?

It seems as though excitement on social media is sending the stock for the top. Here’s the scoop:

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EAR Stock Climbs on Social Volume

As mentioned above, Eargo didn’t make any announcements this morning or yesterday after hours. The most recent news was the launch of Eargo 6, announced at CES a couple of days ago. However, the movement seen in the stock today is hard to ignore.

So, what’s causing it?

A quick search on Stocktwits and Twitter will show that there’s far more social volume on the stock than usual. This alone has the potential to send the stock screaming for the top. After all, EAR stock trades with a public float of around 21 million. While that may sound like quite a bit, there’s really not many shares to go around. So, as social volume spikes and more and more people buy, the supply and demand metrics surrounding the stock become skewed toward gains, and gains become the ultimate result. 

There’s also quite a bit of chatter on the social networks that cater to the trading community about a short squeeze. However, this isn’t necessarily a short squeeze candidate considering the fact that less than ten percent of the float is sold short. The move today simply seems like a low-float run. 

Investors took to social media and talked about the stock, increasing demand. From there, algorithmic traders saw the EAR ticker jumping and dove in as well, expanding the gains. 

Is EAR Stock Just a Pump & Dump?

There’s no doubt that Eargo stock is going to taper down from highs we’ve seen in the market today, but a pump and dump? In my opinion, the answer is no. As with any relatively small company, EAR has gone through some headaches, and there’s likely more to come. However, with the launch of its new device, there may be a lot to look forward to as well. 

Eargo 6 is the company’s sixth-generation FDA Class II exempt hearing aid, and as the company stated at CES 2022, it’s the most powerful device the company has created yet. 

With the new hearing aid, Sound Adjust technology provides far better hearing on an effortless basis. Not to mention, it’s an algorithmic product, using a detailed algorithm to analyze surroundings and provide the user with optimal benefit without requiring manual input from the patient. That’s an incredible feature. 

The new hearing aid also addresses the challenges users face when talking to someone wearing a face mask. It offers a mode, known as mask mode, which will make it easier for the wearer to understand what those behind the mask are saying. 

The Risks

There’s no doubt that there are risks to consider before buying EAR stock. The first of which being that over the past six months, the stock has experienced significant declines and buying now is essentially betting against the trend. It may work out, but more often than not, betting against the trend proves dangerous. 

As with any company, there’s also the risk that the new Eargo 6 doesn’t quite sell as well as the company hopes. Not to mention the general penny stock risks that come with investing in small companies. 

The Bottom Line

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The bottom line here is simple, EAR stock is a risky play, but it may be worth diving in once today’s gains taper off a bit. The fact is that over the past six months, the stock has felt significant pain. However, short interest remains below 10%, suggesting strong investor sentiment with many that believe it has fallen to a significant point of support. On top of that, with a new product hitting the tape, revenue growth may be strong ahead. Sure, EAR stock is a risky investment, but it may pay off in a big way. 

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