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Buy Cheap Tech Stock Sonos Down 25% for Growth Upside?
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Sonos (SONO - Free Report) soared from around $15 a share in October to over $40 in six months. Shares of the high-end home audio firm have fallen about 25% since mid-April, as Wall Street took profits on the seemingly overheated stock.
Despite the pullback, SONO boasts some solid fundamentals heading into its Q3 FY21 financial release on August 11 that might make this tech stock trading for $33 a share appealing.
Turning Up the Volume?
Sonos is a home audio firm that specializes in wireless and multi-room sound systems. The company competes against and is often compared to Bose. Sonos sells a range of sleek, connected speakers, subwoofers, soundbars for TVs, and more, enabling people to build on their home audio collections.
Sonos speakers are sold individually and in packages, with surround sound sets that cost up to $1,900. SONO also sells what it calls architectural speakers and sound systems that can be placed in walls and ceilings.
The speaker firm’s quality and functionality help it thrive in a crowded market that includes tech titans like Apple (AAPL - Free Report) . And the company has benefited as part of a larger shift to modern, connected devices from older, bulkier offerings.
In the spring Sonos entered the popular portable smart speaker market. The WiFi and Bluetooth-enabled Roam costs $169 and is now its most mass appeal speaker.
Sonos also rolled out last November its new ad-free, HD streaming tier of its radio service. Sonos Radio HD costs $7.99 a month and competes against Spotify (SPOT - Free Report) , Apple Music, Amazon Music Unlimited (AMZN - Free Report) , and others.
Image Source: Zacks Investment Research
Other Fundamentals
Sonos struggled after its 2018 IPO, but it took off from the market’s coronavirus lows, alongside countless other tech stocks and consumer businesses that succeeded during rough conditions. SONO jumped from around $9 in March 2020 to hover around $15 by October. It then skyrocketed after it crushed its Q4 estimates and announced a new $50 million repurchase program in November.
Sonos has blown away our adjusted EPS estimates in the trailing four quarters, including posting +$0.31 a share earnings in Q2 when Zacks estimates called for a loss. Meanwhile, its Q2 revenue soared 90% from an easier-to-compare period last year and its gross margin jumped from 41.7% in the prior-year quarter to 49.8%.
Looking ahead, Zacks estimates call for SONO’s FY21 revenue to surge over 25% to $1.7 billion, with FY22 set to pop another 9%. These would come on top of 11% sales expansion in FY19 and 5% growth last year. On the bottom line, SONO is expected to soar from an adjusted FY20 loss of -$0.18 to +$0.85 in FY21, with FY22 set to hit $0.92 a share.
Bottom Line
Sonos lands a Zacks Rank #3 (Hold) at the moment, alongside an “A” grade for Growth in our Style Scores system. Meanwhile, four of the six brokerage recommendations Zacks has are “Strong Buys” or “Buys,” with none below a “Hold.”
SONO has surged around 95% in the past year, but it currently trades 25% below its records at $33 a share. Sonos sits between its 50-day and 200-day moving averages and it rests under neutral RSI levels (50) at 45, which could give it room to run if it’s able to impress Wall Street with strong Q3 results and guidance.
The pullback has also improved its valuation picture, and the speaker firm’s balance sheet is pretty solid, with no debt on the books at the moment. Plus, CEO Patrick Spence is confident Sonos will capture more than its current “approximately 9% of the total spend in the $18 billion premium home audio market” in the U.S.
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Buy Cheap Tech Stock Sonos Down 25% for Growth Upside?
Sonos (SONO - Free Report) soared from around $15 a share in October to over $40 in six months. Shares of the high-end home audio firm have fallen about 25% since mid-April, as Wall Street took profits on the seemingly overheated stock.
Despite the pullback, SONO boasts some solid fundamentals heading into its Q3 FY21 financial release on August 11 that might make this tech stock trading for $33 a share appealing.
Turning Up the Volume?
Sonos is a home audio firm that specializes in wireless and multi-room sound systems. The company competes against and is often compared to Bose. Sonos sells a range of sleek, connected speakers, subwoofers, soundbars for TVs, and more, enabling people to build on their home audio collections.
Sonos speakers are sold individually and in packages, with surround sound sets that cost up to $1,900. SONO also sells what it calls architectural speakers and sound systems that can be placed in walls and ceilings.
The speaker firm’s quality and functionality help it thrive in a crowded market that includes tech titans like Apple (AAPL - Free Report) . And the company has benefited as part of a larger shift to modern, connected devices from older, bulkier offerings.
In the spring Sonos entered the popular portable smart speaker market. The WiFi and Bluetooth-enabled Roam costs $169 and is now its most mass appeal speaker.
Sonos also rolled out last November its new ad-free, HD streaming tier of its radio service. Sonos Radio HD costs $7.99 a month and competes against Spotify (SPOT - Free Report) , Apple Music, Amazon Music Unlimited (AMZN - Free Report) , and others.
Image Source: Zacks Investment Research
Other Fundamentals
Sonos struggled after its 2018 IPO, but it took off from the market’s coronavirus lows, alongside countless other tech stocks and consumer businesses that succeeded during rough conditions. SONO jumped from around $9 in March 2020 to hover around $15 by October. It then skyrocketed after it crushed its Q4 estimates and announced a new $50 million repurchase program in November.
Sonos has blown away our adjusted EPS estimates in the trailing four quarters, including posting +$0.31 a share earnings in Q2 when Zacks estimates called for a loss. Meanwhile, its Q2 revenue soared 90% from an easier-to-compare period last year and its gross margin jumped from 41.7% in the prior-year quarter to 49.8%.
Looking ahead, Zacks estimates call for SONO’s FY21 revenue to surge over 25% to $1.7 billion, with FY22 set to pop another 9%. These would come on top of 11% sales expansion in FY19 and 5% growth last year. On the bottom line, SONO is expected to soar from an adjusted FY20 loss of -$0.18 to +$0.85 in FY21, with FY22 set to hit $0.92 a share.
Bottom Line
Sonos lands a Zacks Rank #3 (Hold) at the moment, alongside an “A” grade for Growth in our Style Scores system. Meanwhile, four of the six brokerage recommendations Zacks has are “Strong Buys” or “Buys,” with none below a “Hold.”
SONO has surged around 95% in the past year, but it currently trades 25% below its records at $33 a share. Sonos sits between its 50-day and 200-day moving averages and it rests under neutral RSI levels (50) at 45, which could give it room to run if it’s able to impress Wall Street with strong Q3 results and guidance.
The pullback has also improved its valuation picture, and the speaker firm’s balance sheet is pretty solid, with no debt on the books at the moment. Plus, CEO Patrick Spence is confident Sonos will capture more than its current “approximately 9% of the total spend in the $18 billion premium home audio market” in the U.S.