Sonos Inc. faces its first big test as a public company Monday, when the speaker company is due to report earnings for the first time.
The maker of high-end speakers went public in early August hoping to chart a different course from the not-so-successful hardware IPOs of the recent past. At the time, the company’s vice president of finance told MarketWatch that Sonos’ IPO would be different because the hardware maker wasn’t trying to create devices that would break every few years to drive a replacement cycle.
Shares of Sonos SONO, +2.93% recently changed hands at $18.75, 25% above the stock’s $15 IPO price.
When the company reports earnings Monday, investors might be less focused on the latest numbers and more focused on what the company has to say about the upcoming holiday season, Stifel analyst Matthew Sheerin wrote in a note to clients.
The December quarter tends to account for a good chunk of the company’s annual sales, he said, and this time around, it will prove a crucial test of market reception to the company’s Beam soundbar, which launched in July.
Sheerin expects that December-quarter sales could rise 90% from a year ago, but he cautions that the company will be benchmarked against a tough comparison, given that it launched the Sonos One late last year.
What to expect:
Earnings: Analysts surveyed by FactSet expect that the company lost an adjust 18 cents per share in the June quarter.
At least six analysts cover the stock, according to FactSet, and they have an average price target of $22.83 on the shares. Half have buy ratings and half have hold ratings.
Revenue: The FactSet consensus calls for $208 million in revenue, compared with $223 million in the year-earlier period.
What else to watch for:
The company may provide some thoughts on the competitive environment in smart speakers, both in terms of what Sonos has seen lately and what is expected heading into the crucial December period.
“Major tech players like Amazon, AMZN, +0.82% Google, GOOGL, +0.53% GOOG, +0.53% and Apple AAPL, +0.05% each are making greater strides to be included in the house through voice assistants and doing so by offering low priced speakers which are subsidized through other business lines,” Jefferies analyst Brent Thill wrote last month in his initiation note on the company.
He rates the stock at hold with a $23 price target.
A key issue for Sonos is whether the company is effectively getting current customers to buy additional speakers for other rooms in their houses. “Sonos’ ability to generate follow-on sales from its existing customer base is an attractive element of its business model,” wrote RBC Capital Markets analyst Amit Daryanani when he initiated coverage of Sonos in late August. He rates the stock at outperform with a $25 price target.
Stifel’s Sheerin will be looking for management commentary on component shortage as well as what he thinks is a new manufacturing partnership. Component issues have affected numerous hardly companies lately, he said.
Sheerin has a hold rating and $20 target price on Sonos shares.
