Insights

Why Sonos Is Soaring Today

What happened
Sonos (NASDAQ: SONO) shares are up 15.8% as of 1:34 p.m. ET on Thursday, following the release of second-quarter results that came in better than expected on Wednesday.
So what
For the three-month stretch ending in March, consumer technology outfit Sonos turned $399.8 million worth of revenue into operating earnings of $0.26 per share. Both figures came in better than analysts’ expecations for a top line of $351.7 million and a bottom line of $0.17 per share, according to Bloomberg. Revenue grew 20.1% year over year, and while operating income slipped 16% from the year-earlier profit of $0.31 per share, investors were forgiving of the impact that rampant inflation has had on the company.
Guidance helped, as did the debut of a new smart speaker of its own.
Image source: Getty Images.

For the full year, Sonos is still expecting a top line of between $1.95 billion and $2 billion, up on the order of 14% to 16% versus last year’s revenue. Although inflation will take a toll on 2022’s profitability, that toll isn’t looking like it will be as big as feared. The company is calling for earnings before interest, taxes, depreciation, and amortization (EBITDA) margin rates of between 14.9% and 15.5%, compared with prior guidance for an EBITDA margin rate somewhere between 14.9% and 16.2% for the year now underway.
Also on Wednesday, Sonos unveiled a low-cost music-playing sound bar — called Ray — at the same time introducing a new voice-controlled feature for its audio devices. Both products push the company deeper into the smart speaker market.
Now what
Thursday’s surge is attention getting, to be sure, and even more impressive in light of the fact that the market as a whole is struggling. Indeed, today’s gains hint at a reversal of a downtrend that’s dragged Sonos shares more than 30% lower just since March’s high, and down roughly 50% since August. This may be a near-term turning point for the stock, particularly if the market itself can start to recover here.
The trouble is, as compelling as the bullish argument for Sonos is at this point, it’s not strong enough to overcome a broader, bearish environment. This one’s still more for speculators than buy-and-hold investors.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sonos Inc. The Motley Fool has a disclosure policy. –

What happened

Sonos (NASDAQ: SONO) shares are up 15.8% as of 1:34 p.m. ET on Thursday, following the release of second-quarter results that came in better than expected on Wednesday.

So what

For the three-month stretch ending in March, consumer technology outfit Sonos turned $399.8 million worth of revenue into operating earnings of $0.26 per share. Both figures came in better than analysts’ expecations for a top line of $351.7 million and a bottom line of $0.17 per share, according to Bloomberg. Revenue grew 20.1% year over year, and while operating income slipped 16% from the year-earlier profit of $0.31 per share, investors were forgiving of the impact that rampant inflation has had on the company.

Guidance helped, as did the debut of a new smart speaker of its own.

Image source: Getty Images.

For the full year, Sonos is still expecting a top line of between $1.95 billion and $2 billion, up on the order of 14% to 16% versus last year’s revenue. Although inflation will take a toll on 2022’s profitability, that toll isn’t looking like it will be as big as feared. The company is calling for earnings before interest, taxes, depreciation, and amortization (EBITDA) margin rates of between 14.9% and 15.5%, compared with prior guidance for an EBITDA margin rate somewhere between 14.9% and 16.2% for the year now underway.

Also on Wednesday, Sonos unveiled a low-cost music-playing sound bar — called Ray — at the same time introducing a new voice-controlled feature for its audio devices. Both products push the company deeper into the smart speaker market.

Now what

Thursday’s surge is attention getting, to be sure, and even more impressive in light of the fact that the market as a whole is struggling. Indeed, today’s gains hint at a reversal of a downtrend that’s dragged Sonos shares more than 30% lower just since March’s high, and down roughly 50% since August. This may be a near-term turning point for the stock, particularly if the market itself can start to recover here.

The trouble is, as compelling as the bullish argument for Sonos is at this point, it’s not strong enough to overcome a broader, bearish environment. This one’s still more for speculators than buy-and-hold investors.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sonos Inc. The Motley Fool has a disclosure policy.

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