The Street turned up the volume on Sonos (SONO) shares after the company reported earnings Wednesday evening.
Shares of the speaker maker exploded 22% on Thursday as it smashed sales and profit forecasts for its fourth fiscal quarter. The 15-year-old company delivered upbeat guidance for its new fiscal year, too.
For Sonos, the strong quarter and outlook reflects the behavior changes well underway among consumers during the COVID-19 pandemic. People continue to spend more time in their homes as they seek to avoid getting the deadly disease. In turn, that has led to mass upgrading of one’s living situation — whether that is repainting the house with a new can of paint bought at Home Depot or adding seven new Sonos speakers throughout the kitchen and dining room.
Sonos CEO Patrick Spence told Yahoo Finance Live the behavior changes have brought his business to a key inflection point. That crossroads is where Sonos is likely able to drive more consistent financial performance (consistency was often an issue for the company pre-pandemic) for investors in large part because how people have altered their lives perhaps for years.
“We have hit an inflection point and also an inflection point with profitability“, Spence said.
Here’s how Sonos fared compared to Wall Street estimates:
Net Sales: up 16% year-over-year to $339.8 million versus $298.8 million estimate
Adjusted EBITDA: $46.4 million versus a loss of $2.7 million last year; estimates for $27.7 million
Adjusted Diluted EPS: 33 cents a share versus estimates for 15 cents a share
Full Year Guidance:
Net Sales: $1.44 billion to $1.5 billion, up 11% to 15%
Adjusted EBITDA: $170 million to $205 million, up 57% to 89%
Wall Street is jumping aboard the new story on Sonos that Spence is telling.
“It is becoming clear that consistent product launches, strong new household growth and growing engagement are combining to deliver the kind of consistent top and bottom line growth not enjoyed by many of its consumer products peers,” wrote Morgan Stanley analyst Katy Huberty in a note to clients.
Huberty thinks the stock is Undervalued, echoing the sentiment Yahoo Finance has seen on Sonos in the wake of its better than expected quarter.
If the company could prove out its new streaming radio service and receive a warm welcome to new products planned over the next 12 months, Sonos shares could stay elevated. Important to that hypothesis is that people remain actively engaged in investing in their homes as they begin to return to work sometime in 2021.
Sonos will have its first investor day (virtual) on March 9, 2021. Expect to hear more on those fronts.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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