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What's Driving Shares of Sonos 12% Lower Today?

By Daniel Miller – Nov 19, 2018 at 3:23PM

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They have a history of volatility. Here's how investors should feel heading into the holiday season.

What happened?

Shares of Sonos (SONO 0.43%), a provider of home sound systems -- with products that include speaker sets, mounts, stands, and cables -- were down 12% as of 2:41 p.m. EST following broader market declines and a tech sell-off.

So what

Today's decline essentially offsets the company's 9% gain on Friday after it released fourth-quarter results that were stronger than expected. Thanks to a solid launch of its Beam smart soundbar, fourth-quarter revenue jumped 27.5% versus the prior year, and Sonos sold 1.12 million products, which was a 47% jump. This is a good reminder for investors that sometimes stocks go up with little direct rhyme or reason, and sometimes they go down. In fact, Sonos especially has a track record of volatility, as you can see in the graph below. 

SONO Chart

SONO data by YCharts.

Now what

Living room with a home theatre setup

Image source: Getty Images.

Going forward, and ignoring day-to-day swings such as today's 12% decline, the company appears positioned to provide investors with sustainable growth in a strong economy. The good news for investors is that the company is likely to take its fourth-quarter momentum into the holiday season when consumers will be looking to purchase smart speakers in huge numbers. Management believes both revenue and adjusted EBITDA will grow faster next year than its long-term targets of 10%-plus and 20%, respectively. The one thing for investors to watch, however, is the company's margins, which have been pressured slightly from sales of lower-priced products. Ultimately, long-term investors should take today's 12% decline amid a broader tech sell-off with a grain of salt; the company is doing well.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has the following options: short January 2019 $15 calls on Sonos Inc. The Motley Fool has a disclosure policy.

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