Freedom cut its revenue forecast for Owlet (OWLT) for fiscal Q3 2026 but raised expectations for Q4. Owlet develops devices and digital services for monitoring infants’ health. Analysts Ilya Zubkov and Arailym Kanatkyzy view the pressure on sales as temporary and maintain a “Buy” rating with a $15 target price. Relative to the price of $4.74 at the time of the analysis, the upside potential is 216.46%. The company’s annual revenue forecast remains at $120 million.
Why Freedom lowered its Q3 forecast
Owlet produces wearable monitors that track infants’ heart rate and blood oxygen levels, cameras, and is also developing the paid Owlet360 service.
Analysts expect Owlet’s Q3 revenue to total $30.5 million — 4.7% less than a year earlier. The financial report has not yet been published: this is an update to forecasts.
One reason for the revision is especially strong sales a year earlier. In fiscal Q3 2025, Owlet launched a new camera, which led to higher demand and distributor purchases and delivered record revenue for the company.
The second factor is competitor sell-offs on Amazon. As noted in Freedom’s report, the platform required sellers to confirm by August 10 that they have U.S. FDA authorization for devices that track infants’ pulse and blood oxygen levels. Sellers of products without the relevant authorization began offering discounts of up to 70–75%.
Some third-party sellers continued the sell-offs in August and early September. This prolonged pricing pressure on Owlet, which chose to hold prices rather than take part in the discount competition.
What could support Owlet’s sales in Q4
The Q4 revenue forecast was raised to $33.1 million. This implies growth of 24.4% year over year and 8.5% versus the expected Q3 result.
Additional support could come from a return of deferred demand and the holiday shopping season. Freedom views the current sales weakness largely as a shift of some revenue between quarters.
Annual expectations and the recommendation did not change
Owlet’s 2026 revenue forecast was maintained at $120 million, implying 13.5% growth and matching the midpoint of the company’s reaffirmed $118–122 million range.
Expected adjusted EBITDA — earnings before interest, taxes, and depreciation with additional adjustments — remains at $12 million.
The subscription business also supports the forecasts. Freedom expects net additions of about 15 thousand subscribers in each of the two remaining quarters of the year. At the same time, a recovery in device sales remains a forecast: its realization depends on a return of demand after competitors’ sell-offs end.
Subscriptions are becoming more important for Owlet’s results
Previously, Freedom noted an improvement in Owlet’s earnings quality and growth in the subscription business. At the end of Q2, the company had 130 thousand paid subscribers, and by year-end analysts expect that figure to rise to 150–160 thousand, i.e., by 15–23%.
Monthly recurring subscription revenue already exceeds $1.1 million. On an annualized basis, that is more than $13.2 million — about 11% of the company’s projected 2026 revenue. The subscription business has a gross margin of 68.4%, so growth in its share supports Owlet’s profitability. According to Freedom’s forecast, in 2026 the company’s gross profit will increase by 23% to $65.9 million, and adjusted EBITDA will grow sixfold to $12 million.
Not an individual investment recommendation.