Telehealth Partnerships And AI Insights Will Broaden Digital Health Markets

Key Takeaways

• Growth in digital health device adoption, expanded offerings, and regulatory clearances support strong demand, market leadership, and improved pricing power.
  
• Subscription-based recurring revenue, higher retention, and integration with healthcare providers drive predictable earnings, premium pricing, and broader market access.
  
• Slow healthcare channel progress, international tariffs, portfolio concentration, and adoption uncertainty threaten revenue growth, margin stability, and successful expansion of new services.

Catalysts

Provides digital parenting solutions in the United States, the United Kingdom, and internationally.

• Accelerating adoption of connected health devices among parents-evidenced by double-digit sales growth, increased registry listings, and international expansion-signals strong underlying demand as digital health solutions become mainstream, which is likely to drive sustained revenue growth.
  
• Transition to a recurring subscription model (Owlet360), with 66,000+ paying subscribers and improving attach/retention rates, will increase customer lifetime value and provide more predictable, higher-margin recurring revenue streams.
  
• Expansion of product offerings into AI-driven insights and enhanced platform features (including telehealth and historical data analytics) leverages rising digital health literacy, likely supporting premium pricing, higher ARPU, and improved net margins over time.
  
• Integration with healthcare providers (e.g., hospital partnerships, insurance reimbursement, and Owlet Connect enterprise data platform) opens access to larger institutional markets and insurance channels, which could accelerate revenue scale and earnings growth as preventative pediatric monitoring gains clinical acceptance.
  
• Strengthening regulatory acceptance and product differentiation, as seen in FDA/CE clearances and dominant category leadership, supports future market expansion and pricing power, which should improve revenue durability and margins as the industry evolves.

Owlet Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Owlet's revenue will grow by 23.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -52.2% today to 2.7% in 3 years time.
• Analysts expect earnings to reach $4.4 million (and earnings per share of $0.12) by about August 2028, up from $-46.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 74.7x on those 2028 earnings, up from -2.7x today. This future PE is greater than the current PE for the US Medical Equipment industry at 28.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.85%, as per the Simply Wall St company report.

Owlet Future Earnings Per Share Growth

Risks

• Persistently slow progress and inconsequential revenue from the healthcare channel, especially regarding insurance reimbursement and hospital adoption, signals a risk that this strategic pillar may not materially contribute to revenue growth or diversify earnings in the long term.
  
• The company faces continued exposure to rising international tariffs (Vietnam: 20%, Thailand: 19%), which are expected to significantly impact gross margins going forward; the inability to fully offset these costs, or successful execution on sourcing diversification, could compress margins and dampen net earnings.
  
• Owlet's dependence on a relatively narrow product portfolio, dominated by Dream Sock and Dream Duo, increases vulnerability to potential regulatory, clinical, or competitive shocks that could undermine core revenue and future earnings stability.
  
• The lengthy sales cycle, technical integration requirements, and complex contracting processes with hospitals and healthcare systems create significant barriers to rapid penetration in the institutional market, delaying anticipated scale-up and limiting near
• to mid-term revenue contribution from this segment.
  
• Slower-than-expected timeline and uncertainty regarding the rollout and adoption of new services (such as telehealth and international expansion of subscriptions) introduces execution risk and could impede subscriber growth and lifetime value expansion, affecting both top line and ARPU growth.

Valuation

• The analysts have a consensus price target of $13.2 for Owlet based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $167.1 million, earnings will come to $4.4 million, and it would be trading on a PE ratio of 74.7x, assuming you use a discount rate of 7.8%.
• Given the current share price of $7.71, the analyst price target of $13.2 is 41.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.