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Sonos Playing Out Strong First Half of 2021

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While the Delta variant of COVID-19 continues to weigh on energy and travel stocks, and Chinese regulatory difficulties bring down mainland-based companies, the consumer discretionary sector has been seeing slow but steady growth. Home speaker producer Sonos, Inc. (SONO) posted another quality quarter last week, and seems to be poised to continue to reap profits. (See Sonos stock charts on TipRanks)

Calling Sonos the “Lego of Speakers,” meaning the company's modular speaker systems keep customers coming back for more, Brent Thill of the Jefferies Group spelled out his bullish hypothesis. He attributes a possible rise in share price to Sonos’ large portfolio of patents, attractive stock valuation, and its strong business fundamentals.

Thill upgraded his rating from Hold to Buy, and concurrently raised his price target from $43 to $50. This new higher target now represents a possible 12-month upside of 29.7%.

The five-star analyst explained that SONO has been seeing high demand, to the point that it is now exceeding the company’s supply. The consumer order backlog is expected to persist for at least another two quarters, and should provide for a steady stream of purchases and revenue during that time.

Sonos has now beat Wall Street consensus estimates on revenue for two consecutive quarters, as well as raised guidance. Thill anticipates a third earnings beat in Q3, also due in part to the company’s own conservative forecasts.

An interesting focal point of Thill’s report is Sonos’ vast collection of patents. He wrote that the speaker company “boasts a portfolio of over 2,149 utility and design patents, granting them one of the most valuable patent portfolios in consumer tech.”

The International Trade Commission recently sided with Sonos over an infringement disagreement with Google (GOOGL). While Thill mentions that Sonos is “a ways away” from financial compensation, he does expect more settlements and licensing deals moving forward. This would help the firm diversify its revenue streams.

On TipRanks, SONO has an analyst rating consensus of Moderate Buy, based on 2 Buy ratings. The average Sonos price target is $50.50, suggesting a possible 12-month upside of 31.05%. SONO closed trading Tuesday at a price of $38.54 per share.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.