Freedom Broker analysts reiterated their “Buy” recommendation on Owlet, Inc. (OWLT) and maintained a target price of $15. At the current price of $5.6 per share, the upside potential is 167.86%. In the analysts’ view, the core investment thesis is gradually shifting from revenue growth to improving earnings quality: gross margin expansion and fast-growing subscription revenue are laying the groundwork for stronger earnings momentum over the long term.
Company bets on subscriptions
Owlet, Inc. is a technology company in the digital child-monitoring space, developing devices and services to track infants’ health. The core product lineup consists of the wearable Dream Sock and BabySat monitors—wireless smart monitors in the form of a baby sock that is placed on the child’s foot to track heart rate and blood oxygen levels in real time. A key growth focus is the paid subscription service Owlet360, which turns device sales into a recurring-revenue model.
The central narrative has shifted toward earnings quality, Freedom Broker analysts believe. In their assessment, this is supported by two consecutive quarters of margin expansion and steady subscription base growth of about 15,000 net users per quarter.
Revenue rose by nearly 30%
In Q2 2026, Owlet revenue reached a record $33.9 million, up 29.9% year over year. The figure exceeded Freedom Broker’s forecast by $2.8 million. Analysts, however, urge investors to account for a calendar effect: the shift of the annual Amazon Prime Day sale from Q3 2025 to Q2 2026 temporarily supported the result. Freedom Broker estimates that about $2.2 million of the revenue outperformance will be offset in the second half of the year, with roughly 75% of that amount falling in Q3.
At the same time, analysts point to more sustainable growth factors. Dream Sock unit sales increased year over year, and Owlet continued to gain share in the U.S. market. The company is also benefiting from a shift in demand structure: during Prime Day, health monitoring was the only growing segment in the category, while sales of traditional audio and video monitors were declining.
International business grows 214%
The fastest-growing area was international revenue, which increased 214% y/y and, by analysts’ calculations, totaled about $5.8 million, or roughly 17% of total revenue. Northern and Eastern Europe—specifically the Czech Republic, Austria, and Germany—made the largest contribution. European sales during Prime Day rose by more than 100% year over year.
Freedom Broker notes that international shipments into distribution channels are still significantly outpacing sales to end consumers. Therefore, part of the 214% growth may reflect initial channel fill rather than sustained consumer demand. Freedom Broker emphasizes that sell-in shipments to distribution channels still substantially exceed actual sell-through to end consumers. Analysts expect this gap to narrow to confirm that international revenue growth reflects sustainable consumer demand rather than only distributor inventory replenishment
Subscription becomes a standalone driver
Subscription revenue in Q2 reached a record $3.2 million versus $0.9 million a year earlier. The subscriber base grew to 130,000 users, and monthly recurring revenue exceeded $1.1 million.
The attach rate of Owlet360 to Dream Sock in the U.S. increased to 36% from 34% in the prior quarter. Gross margin in the subscription business reached 68.4% versus 67.4% in Q1 2026. In the analysts’ view, scaling the subscription model can meaningfully increase the business’s value over time, as recurring revenue carries more attractive margins.
Margin rises even without the one-off effect
Reported gross margin in Q2 was 64.4%, but the figure included $3.5 million in tariff refunds. Excluding this one-off effect, gross margin was 54% and increased by 270 basis points year over year.
Freedom Broker attributes the improvement to a higher share of subscriptions, a more favorable product mix, and the allocation of fixed costs across a larger revenue base. Adjusted EBITDA excluding the tariff refund was $2.9 million, above the analysts’ estimate of $2.7 million.
Amazon could change the competitive landscape
One of the key potential catalysts, analysts believe, is Amazon’s new requirements for products in the category. After the sell-through period for competitors’ inventory that does not meet the new requirements ends, Owlet expects to remain the only available health-monitoring solution in its largest sales channel.
Freedom Broker views Q3 as a transition period, when price pressure due to competitors’ inventory sell-offs may persist. At the same time, a lasting shift in the competitive structure after the new requirements take effect could become a more important driver for the company’s valuation in 2027–2028.
Early-year figures
In Q1 2026, Owlet revenue totaled $22.5 million, up 6.4% year over year. Subscription revenue reached a record $2.7 million, and gross margin increased to 54.5% from 53.7% a year earlier. At the same time, the company posted a net loss of $3.3 million versus net income of $3.0 million a year earlier, and adjusted EBITDA came in at minus $1.5 million versus breakeven a year earlier.
As of the end of Q1, Owlet360 had more than 115,000 paying subscribers. The company also launched the pediatric telemedicine service Owlet OnCall and outlined a strategic goal of attracting about 1 million new customers per year and retaining families for at least two years. Over the long term, management expects to build a base of more than 1 million subscribers, which should strengthen Owlet’s transition from a device maker to a platform with recurring revenue.
This is not an individual investment recommendation.