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Why Is Sonos (SONO) Down 2.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Sonos (SONO - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sonos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Sonos Q1 Earnings Beat Estimates

Sonos reported first-quarter fiscal 2024 non-GAAP earnings per share (EPS) of 84 cents compared with 79 cents in the prior-year quarter. On a GAAP basis, the company reported EPS of 64 cents compared with 57 cents in the year-ago quarter. The Zacks Consensus Estimate was pegged at 60 cents.

Quarterly revenues decreased 8.9% (down 10.5% on a constant-currency basis) year over year to $612.9 million due to soft consumer demand. However, the top line surpassed the Zacks Consensus Estimate by 4.1%.

Revenues Details

Revenues from Sonos speakers were $503.1 million, down 6.7% from the prior-year quarter’s levels.

Sonos system products’ revenues were $84.5 million, down 26.1% year over year. Revenues from Partner products and other totaled $25.2 million, up 33.5% year over year.

Region-wise, revenues from the Americas totaled $392.4 million, down 1% year over year. Europe, the Middle East and Africa generated revenues of $191.8 million, down 20%. Revenues from the Asia Pacific were down 20% to $28.6 million.

Other Details

Gross profit was $282.7 million, down 0.9% from the prior-year quarter’s levels. Gross margin expanded 374 bps year over year to 46.1%, mainly due to lower component costs, fewer spot component purchases, lower inventory-related provisions, and foreign currency tailwinds.

Total operating expenses amounted to $179.4 million, up from $172.3 million in the year-ago quarter, reflecting higher research and development expenses.

Operating income was $79.7 million compared with $86.3 million in the year-ago quarter. Adjusted EBITDA totaled $115.2 million compared with $123.9 million in the prior-year quarter. Lower revenues and increased advertising and marketing spend resulted in the downside.

Cash Flow & Liquidity

For the fiscal first quarter, Sonos generated $275.4 million of cash from operations. Free cash flow was $269.3 million.

As of Dec 30, 2023, cash and cash equivalents were $4673 million compared with $220.3 million as of Sep 30, 2023. SONO has no debt.

Sonos repurchased shares worth $23 million. The company has approximately $177 million remaining under its $200 million share repurchase authorization.

2024 Guidance

For fiscal 2024, Sonos now expects revenues to be down 3% to up 3% year over year and in the range of $1.6-$1.7 billion. On a constant-currency basis, revenues are anticipated to be down 3% to up 3%.

The gross margin is projected to be between 45% and 46%. Adjusted EBITDA is estimated to be between $150 million and $180 million, with the margin in the range of 9.4-10.6%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -106.98% due to these changes.

VGM Scores

At this time, Sonos has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sonos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Sonos is part of the Zacks Audio Video Production industry. Over the past month, Dolby Laboratories (DLB - Free Report) , a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended December 2023 more than a month ago.

Dolby Laboratories reported revenues of $315.57 million in the last reported quarter, representing a year-over-year change of -5.8%. EPS of $1.01 for the same period compares with $1.11 a year ago.

For the current quarter, Dolby Laboratories is expected to post earnings of $1.20 per share, indicating a change of -4.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.1% over the last 30 days.

Dolby Laboratories has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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