Disclosure: Zepp Health Corporation has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Price and Volume (1-year)
* Zepp Health has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions. All figures in US$ unless otherwise specified.
Unit Sales & Key Metrics
Zepp ranks seventh in global smartwatch sales
For context, Apple ships ~35M units annually; Zepp ships ~3-4M
Zepp shipments jumped 20% in Q1, in line with our estimate, while global smartwatch shipments grew only 4% YoY
Source: FRC / Company
Revenue: +34% YoY, 4% above our forecast, driven by higher shipments and selling prices (+11% YoY)
Gross Margins: +0.4 pp YoY, in line with our estimate and above wearable tech (36%), and consumer electronics (25%) averages
We believe new higher-priced product launches should support margin growth in 2026
Operating Expenses: +14% YoY, 3% above forecast, driven by FX, prepaid marketing, and sales/distribution investments; otherwise broadly flat YoY and in line with estimates
EPS: ($0.08), flat YoY and in line with our estimate, as higher OPEX offset strong revenue growth
Source: Company, FRC
Net Cash & Investments: $147M ($10.25/share) vs. share price of $5.29, implying the stock trades below liquid asset value
FRC Projections and Valuation
Per consensus forecasts, global smartwatch shipments are expected to grow 7% in 2026, driven by product upgrades, rising health awareness, AI integration, and broader wearables adoption.
Market Share and Growth
Source: FRC / Various
Zepp products accounted for 1.6% of global smartwatch shipments in 2025; we anticipate this increasing to 1.8% in 2026, driven by an expanding product lineup, and shipment growth outpacing most competitors
Zepp's Q2 Revenue Guidance: 6%–14% YoY growth, below our expectations
Despite robust Q1 revenue growth, softer-than-expected Q2 guidance has led us to lower our revenue forecasts
Given higher-than-expected operating expenses, we are lowering our EPS forecasts
Source: FRC
While EPS should improve significantly in 2026, we now expect profitability in 2027 vs. 2026 previously
As a result, our DCF valuation decreased from $50 to $40/share
Source: FRC/S&P Capital IQ
Sector EV/forward revenue is up 14% since our previous report in April 2026
ZEPP remains undervalued, trading at just 0.14x forward revenue (previously 0.45x), well below the sector average of 3.74x (previously 3.27x)
Applying 3.74x to our 2026 revenue forecast for Zepp, we arrived at a comparables valuation of $66/share (previously $62/share)
Despite lowering our FY2026 forecasts following softer Q2 guidance, we believe Zepp remains fundamentally well-positioned, supported by market-leading shipment growth, resilient margins, a strong balance sheet, and an exceptionally attractive valuation. We reiterate our BUY rating, and lower our fair value estimate from $56.28 to $53.01/share, reflecting a lower DCF valuation, partially offset by a higher comparables valuation. With the shares trading below net liquid asset value, and at a 96% discount to the sector's forward EV/Revenue multiple, we believe the current valuation significantly understates the company's long-term potential.
Risks
We believe the company is exposed to the following key risks (not exhaustive):
We are maintaining our risk rating of 3 (Average)
APPENDIX
