Before you invest in the Oura IPO, understand what you're buying

 The health-data company could see a pop in its stock price, but there are plenty of warning signs

U.S. tennis player Taylor Fritz wearing an Oura Ring during this year's U.S. Open.

Oura, which makes those $350-plus health-tracking rings that sync with your smartphone, is going public this week and the IPO is 300% oversubscribed, according to Bloomberg.

If the report is right, that suggests - but does not prove - the stock could get a good pop when trading begins on Wednesday. Those who buy Oura stock (OURA) in an initial public offering through their broker ahead of the IPO, in the hope of selling for a quick profit when trading begins, are traditionally known as "stags."

Stags have a decent chance of making a buck in this IPO, and if you do it through your IRA you will avoid the tax hit on a short-term capital gain. Caveat investor, as always. Good luck.

But, short-term trading opportunities aside, what should we make of this IPO?

There are warning signs aplenty.

You're buying into an early stage company that competes with the biggest and most powerful consumer companies on the planet - including Apple (AAPL), Alphabet's (GOOG) (GOOGL) Google, South Korea's Samsung (KR:005930) and others. Yikes.

Pretty much all of the $2.2 billion or so being raised in the IPO is either going to existing stockholders, who are cashing in some of their gains, or to pay taxes on insiders' restricted-stock units.

The company's valuation in the IPO, likely to be around $14 billion, looks big compared to revenues, which were $1.9 billion in the first nine months of the fiscal year, let alone net income, which was just $61 million during the same period. Meanwhile operating expenses doubled through the first nine months, rising even faster than sales.

Samsung already makes its own ring. Apple, Google and many others make comparable wearables, such as the Apple Watch, which also monitor activity and health metrics and sync with your phone. These companies are increasingly getting into the business of healthcare. Oura offers its customers the option to order lab tests via their devices. Apple just announced plans to do the same.

The more Oura's rings succeed in the market, the likelier these tech giants are to launch their own.

Oura says paid subscribers - meaning those who bought a ring and are subscribing to the app, which costs $5.99 a month - are likely to hit 5.7 million by the end of the fiscal year, which coincides with the Sept. 30 IPO date.

For comparison, analysts estimate Apple sells around 40 million watches a year.

These are good reasons to think twice, or even more often, about whether or not to jump into the IPO - or about whether to hang on to your stock if it gets a pop when it goes public.

But there are also reasons not to write this company off.

First, a $14 billion valuation isn't huge these days. A major consumer-electronics company, or even a healthcare company, might find it cheaper and faster to take over Oura than to start from scratch. This company wouldn't be a snack - it wouldn't even be a canape - for $4 trillion Alphabet or $5 trillion Apple.

Notably, Eli Lilly (LLY) already partners with Oura and indicated it wants to buy up to $100 million worth of stock in the IPO.

Oura is growing fast: Sales are rising 74% a year at the last count, which measures the nine months to June 30 against the same period a year earlier. The company is profitable, and at the last count had little or no net debt.

Membership revenue, meaning revenue from app subscriptions, rose 110% from full-year 2024 to full-year 2025, and so far has risen 121% this year. Oura rings are for sale in 8,400 stores worldwide, but so far 80% of sales have been within the U.S.

Rings are certainly less obtrusive than a smartwatch, many of which are pretty darn clunky. And because they are focused healthcare products, Oura Rings may be eligible for purchase or reimbursement using flexible-spending accounts or health-spending accounts (though you need to check with your plan's administrator). That means some of the company's sales are effectively being subsidized by the taxpayer.

This is a health-data company. Oura says its rings track more than 50 health metrics. Some 72% of customers are women, and the company says those trying to start a family may buy the ring for its ovulation-cycle tracking, which has 96% accuracy.

Oura says it has already accumulated 42 billion hours of health data, and if 5.7 million people are wearing these rings and tracking their data 23 hours a day, which the company says is the average, that's another 131 million extra hours of data a day, or just over 4 billion a month.

Probably the most impressive datapoint in the entire, 300-plus page IPO prospectus is that 40% of new Oura customers come from word-of-mouth recommendations from existing customers. That speaks pretty well about the customer experience and brand loyalty.

Churn, meaning the percentage of paying subscribers who cancel each year, is reasonably modest, at 15%, as well.

I'd only buy into this IPO and hold on to the stock if I thought Oura could either beat its massive competitors or perhaps tempt them to buy it out. But even a takeover wouldn't be a guarantee of profit.

Fitbit pretty much created the smart wristband. But after years of getting pounded by massive competitors, it ended up being taken over by Google for about a third of its IPO price. Investors missed out on years of gains in the stock market as well.

On the positive side, Fitbit stags who bought into the IPO but sold soon after the stock went public made fast profits of up to 150%.

https://www.morningstar.com/news/marketwatch/20260928107/before-you-invest-in-the-oura-ipo-understand-what-youre-buying