Sonos
Shares of Sonos Inc. suffered by far their largest single-day percentage drop Tuesday, after the speaker manufacturer delivered a bland first earnings report as a public company.
The company’s June-quarter results were largely in line with expectations, as was the company’s September-quarter outlook, but Sonos SONO, -22.03% shares tumbled 22% in Tuesday trading, after the stock gained 13% in Monday’s session for its best session on record.
Some analysts shrugged off the report, arguing that the company is due to face a more important test in the coming months. The holiday period is typically Sonos’ strongest, and this year it will provide a good view into the traction for Sonos’ new Beam soundbar.
The company’s December-quarter results “will be a more significant catalyst for Sonos shares, as it will give investors a better read on market acceptance of new products (Beam, Sonos One), as well as the competitive landscape, which only promises to get more crowded,” wrote Stifel’s Matthew Sheerin, who rates the stock at hold with a $20 price target.
Raymond James analyst Adam Tindle, who has an outperform rating and $24 target on the stock, said there were “no surprises” in the latest quarter.
“While bears may argue declining margins are a result of product commoditization and profitability will remain challenged, we feel these issues are mainly transitional as both MLCC pricing and increased product launches remain headwinds,” he wrote.
A shortage of MLCCs, or multi-layer ceramic capacitators, has plagued several electronics companies, Stifel’s Sheerin wrote in his preview of Sonos’ earnings.
Jefferies analyst Brent Thill agreed that the quarter wasn’t very surprising, but he’s somewhat concerned about the performance of Sonos’ new Beam product.
“While being judged against raised internal expectations, we would like to see a big product launch such as the Beam performing above expectations,” wrote Thill, who has a hold rating and $23 target on shares. “While management does not believe the Beam is cannibalizing Playbase/bar, the jury is out on what upside can be driven by the lower entry point for a TV soundbar.”
Morgan Stanley’s Katy Huberty was also disappointed on the Beam front, writing that the latest results “lacked transparency into Beam sales, which is key to stock performance.”
New products tend to represent 23% to 25% of Sonos revenue, and she’d like to see more visibility into the Beam’s traction before turning more constructive on the stock. She maintained her equal-weight rating and $20 target price.
Of the six analysts tracked by FactSet who cover the stock, three have buy ratings and three have hold ratings. The average price target is $22.83, 27% above current levels.
Sonos closed at $16.56, 10.4% above the company’s August IPO price of $15. The stock has dropped 14% in the past month, while the S&P 500 index SPX, +0.37% has climbed 2%.
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