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Why Sonos Inc. Stock Plunged Today

By Steve Symington - Updated Sep 11, 2018 at 6:50PM

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The market wasn't pleased with the smart-speaker specialist's first report as a public company.

What happened

Shares of Sonos Inc. (SONO 6.40%) fell 22% on Tuesday, after the smart-speaker specialist announced mixed fiscal third-quarter 2018 results.

More specifically, Sonos' quarterly revenue declined 6.6% year over year to $208.4 million, despite an 11.4% increase in its number of products sold, to 886,514. On the bottom line, that translated to a net loss of $27 million, or $0.45 per share, widening from a $0.26-per-share loss in the same year-ago period. Analysts, on average, were looking for a significantly narrower net loss of $0.22 per share on slightly lower revenue of $208 million.

SONOS Airplay 2 smart speaker on a table next to a bowl of fruit and a smartphone

IMAGE SOURCE: SONOS.

So what

To explain the disparity between Sonos' revenue declines and product unit growth, the company noted the $699 Playbase product that launched in last year's fiscal third quarter. By contrast, sales this quarter were dominated by its lower-priced, lower-margin Sonos One product, which launched last October with an MSRP of $199.

But Sonos' results certainly had bright spots as well. For one, the company is rightly pleased that it's expanding its reach; Sonos launched in Japan shortly after the end of the quarter, and management notes that its quarterly direct-to-consumer revenue soared 20% year over year.

Now what

Looking ahead to the full fiscal year, Sonos expects revenue in the range of $1.109 billion to $1.114 billion, roughly in line with Wall Street's consensus estimates. 

To be fair, investors should note that Sonos stock had climbed more than 40% from its $15-per-share IPO last month leading up to this report, including a more than 13% pop yesterday as the market anticipated its first quarterly report as a public company.

Given its bottom-line shortfall relative to estimates, however, and with the stock still susceptible to post-IPO volatility, it's hardly surprising to see shares pulling back today.

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