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Sonos Inc (SONO)
NASDAQ:SONO
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Sonos
(NASDAQ:SONO)51Neutral
Positive Factors
Negative Factors
Financial Performance
SONO posted a largely in-line Sept Q, but guided to Dec Q revs and Adj. EBITDA 3-24% below MSe, as several demand headwinds linger into the holiday Q.
Leadership
Sonos is left with an interim CEO and first-time public markets CFO - which creates an elevated level of investor uncertainty.
Product and App Issues
Sonos has faced consistent negative consumer feedback from existing Sonos product users that have complained about a multitude of functionality issues with the new app.
Sonos (SONO) vs. S&P 500 (SPY)
Market Cap
$1.53B
Dividend YieldN/A
Average Volume (3M)2.11M
Price to Earnings (P/E)―
Beta (1Y)1.52
Revenue Growth-8.74%
EPS Growth-2452.05%
CountryUS
Employees1,708
SectorTechnology
Sector Strength48
IndustryHardware & Equipment
Share Statistics
EPS (TTM)-0.57
Shares Outstanding119,082,664
10 Day Avg. Volume1,741,032
30 Day Avg. Volume2,113,558
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.05
Price to Cash Flow (P/CF)2.50
P/FCF Ratio2.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$14.50Price Target Upside12.58% Upside
Rating ConsensusHold
Number of Analyst Covering3
Sonos Business Overview & Revenue Model
Company DescriptionSonos, Inc. is a leading developer and manufacturer of wireless home sound systems. Founded in 2002 and headquartered in Santa Barbara, California, Sonos offers a range of smart speakers, soundbars, and components that enable high-quality audio streaming across various rooms. The company is renowned for its innovative technology that supports seamless audio integration across multiple devices and platforms, including popular voice assistants and music streaming services.
How the Company Makes MoneySonos generates revenue primarily through the sale of its audio products, which include wireless speakers, home theater systems, and audio components. These products are sold directly to consumers via the company's online store and through third-party retailers worldwide. Licensing agreements with technology partners, such as streaming service providers, also contribute to its revenue streams. Additionally, Sonos benefits from strategic partnerships with other technology companies, enhancing its product offerings and market reach. The company's focus on premium audio quality and user-friendly experiences helps maintain a competitive edge in the growing market for smart home entertainment systems.
Sonos Financial Statement Overview
Summary
Sonos is facing challenges with declining revenues and profitability issues, as evidenced by negative net income and operating margins. The balance sheet remains stable with low leverage, but the negative return on equity highlights ongoing profitability concerns. Cash flows indicate some operational efficiency, but overall, the company needs to address revenue growth and profitability to improve financial health.Income Statement
Sonos has experienced a decline in revenue over the past few years, with a recent TTM revenue of $1.46 billion compared to $1.75 billion in 2022. The company is struggling with negative profit margins, as evidenced by a gross profit margin of 44.52% and a net profit margin of -4.73% for the TTM. EBIT and EBITDA margins are also negative, indicating operating challenges.40
Negative
Balance Sheet
The balance sheet shows moderate financial stability with a debt-to-equity ratio of 0.12, which is relatively low, indicating manageable leverage. However, the return on equity is negative at -14.68%, reflecting the negative net income. The equity ratio stands at 48.68%, suggesting a balanced asset structure between equity and liabilities.55
Neutral
Cash Flow
Sonos's cash flow situation shows some resilience with a positive operating cash flow of $70.68 million for the TTM, although free cash flow growth is declining. The operating cash flow to net income ratio is negative due to the negative net income, but the company maintains a positive free cash flow to net income ratio, indicating some efficiency in cash generation relative to net income.60
Neutral
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.46B | 1.52B | 1.66B | 1.75B | 1.72B | 1.33B | Gross Profit |
| 648.10M | 689.37M | 716.49M | 796.37M | 809.99M | 571.96M | EBIT |
| -77.25M | -48.05M | -20.55M | 69.28M | 154.96M | -18.60M | EBITDA |
| -17.72M | 25.67M | 54.10M | 107.79M | 191.40M | 17.83M | Net Income Common Stockholders |
| -68.86M | -38.15M | -10.27M | 67.38M | 158.59M | -20.11M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 431.53M | 221.16M | 220.23M | 274.86M | 640.10M | 407.10M | Total Assets |
| 1.21B | 916.31M | 1.00B | 1.19B | 1.14B | 816.05M | Total Debt |
| 33.15M | 64.14M | 56.11M | 36.13M | 44.68M | 86.19M | Net Debt |
| -398.39M | -105.59M | -164.12M | -238.73M | -595.42M | -320.91M | Total Liabilities |
| 573.52M | 487.69M | 483.58M | 627.88M | 569.76M | 518.21M | Stockholders Equity |
| 633.35M | 428.62M | 518.66M | 560.51M | 569.04M | 297.84M |
| Cash Flow | Free Cash Flow | ||||
| 8.40M | 134.66M | 50.12M | -74.48M | 207.69M | 128.95M | Operating Cash Flow |
| 70.68M | 189.91M | 100.41M | -28.26M | 253.23M | 161.99M | Investing Cash Flow |
| -108.50M | -105.24M | -50.29M | -172.63M | -45.53M | -69.32M | Financing Cash Flow |
| -147.42M | -137.31M | -108.59M | -150.26M | 24.97M | -27.09M |
Sonos Technical Analysis
Negative
12.88
Price Trends
13.87
Negative
13.71
Negative
13.57
Negative
Market Momentum
-0.23
Negative
43.57
Neutral
47.40
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SONO, the sentiment is Negative. The current price of 12.88 is below the 20-day moving average (MA) of 13.05, below the 50-day MA of 13.87, and below the 200-day MA of 13.57, indicating a bearish trend. The MACD of -0.23 indicates Negative momentum. The RSI at 43.57 is Neutral, neither overbought nor oversold. The STOCH value of 47.40 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SONO.
Sonos Risk Analysis
Sonos disclosed 41 risk factors in its most recent earnings report. Sonos reported the most risks in the “Ability to Sell” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Sonos Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Performance Comparison
SONO
Sonos
12.88
-6.08
-32.07%
LOGI
Logitech
97.67
7.70
8.56%
SSNLF
Samsung Electronics
46.21
0.00
0.00%
Sonos Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: -9.68% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed sentiment. While there were notable achievements in revenue management, soundbar demand, and operational efficiency, there were significant challenges such as the revenue decline, workforce reduction, and decreased free cash flow. The company is also undergoing major restructuring efforts.Highlights
Revenue Achievement
Q1 revenue was $551 million, towards the high end of the guidance.
Soundbar Success
Stronger than expected demand for the new Arc Ultra soundbar, achieving highest ever quarterly market share in US home theater on a dollar basis.
Operational Efficiency
GAAP operating expenses were $193 million, and non-GAAP operating expenses were $169 million, both down 5% and 6% year over year, respectively.
Cash Position
Ended the quarter with $328 million of net cash, including $41 million in marketable securities.
Share Repurchase
Returned $27 million to shareholders in Q1, reducing share count by 1.9 million shares.
Lowlights
Revenue Decline
Revenue down 10% year-over-year, driven by softer demand and challenges with 2024 app rollout.
Workforce Reduction
Reduction of about two hundred employees, including nearly fifty managers and executives, as part of structural transformation.
Free Cash Flow Decrease
Q1 free cash flow was $143 million, down from $269 million last year.
Guidance for Q2
Expected Q2 revenue range is $240 million to $265 million, representing a year-over-year change of negative 5% to positive 5%.
Company Guidance
During the Sonos Q1 2025 earnings call, interim CEO Tom Conrad outlined the company's strategic shifts, including a 12% workforce reduction impacting around 200 employees, to streamline operations and align expenses with revenue. The company reported Q1 revenue of $551 million, near the high end of their guidance, though a 10% year-over-year decline due to market challenges and app rollout issues. Sonos achieved a GAAP gross margin of 43.8%, surpassing guidance by 80 basis points, with non-GAAP gross margins at 44.7%. The company ended the quarter with $328 million of net cash and resumed share repurchases, returning $27 million to shareholders. Looking ahead, Q2 revenue is projected between $240 million and $265 million, with GAAP gross margins expected to range from 42% to 44%. Adjusted EBITDA for Q1 was $91.2 million, representing a 16.6% margin, and Q2 adjusted EBITDA is projected to be between negative $27 million and negative $6 million. Saori Casey, CFO, highlighted ongoing transformation efforts aiming for $60 million to $70 million in run rate savings by FY26, emphasizing a focus on operational efficiency and prioritizing high-return opportunities.Sonos Corporate Events
Stock BuybackBusiness Operations and Strategy
Sonos Announces New $150 Million Stock Repurchase Program
Neutral
Feb 24, 2025
On February 24, 2025, Sonos, Inc. announced a new common stock repurchase program authorized by its Board of Directors, allowing for the repurchase of up to $150 million in common stock. This new program replaces the previous $200 million program, which had $11 million remaining. The repurchase program, which has no expiration date, will be funded through Sonos’ existing cash and cash equivalents or future cash flow, and its execution will depend on various factors such as stock price and market conditions. This move reflects Sonos’ strategic financial management and could impact its stock value and shareholder returns.
Executive/Board Changes
Sonos Announces Resignation of Chief Commercial Officer
Neutral
Feb 24, 2025
On February 19, 2025, Sonos, Inc. announced the resignation of its Chief Commercial Officer, Deirdre Findlay, effective March 3, 2025, due to personal reasons without any disagreements with the company. A Transition Agreement was established on February 20, 2025, allowing Ms. Findlay to continue providing consulting services until May 18, 2025, ensuring continuity in marketing strategy and maintaining her stock awards and benefits during this period.
Business Operations and Strategy
Sonos Announces Workforce Reduction and Reorganization
Negative
Feb 5, 2025
On February 5, 2025, Sonos announced a reorganization and workforce reduction affecting approximately 12% of its employees, aiming to streamline operations and improve its cost structure for long-term success. The company expects restructuring charges of $15 to $18 million, primarily for severance costs, to be incurred in the second quarter of fiscal 2025, reflecting its commitment to enhancing collaboration by forming simpler, cross-functional teams and shifting its product organization into functional groups.
Executive/Board ChangesBusiness Operations and Strategy
Sonos Announces Leadership Change with Interim CEO
Neutral
Jan 13, 2025
Sonos announced that Patrick Spence will step down as CEO, with Tom Conrad appointed as Interim CEO. This leadership transition is aimed at maintaining the company’s innovation and growth trajectory, with a search for a permanent CEO underway. Conrad, with extensive experience in consumer technology, will focus on enhancing the Sonos core experience and driving financial performance during the transition.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.