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Can Sonos Stock Bounce Back From Its All-Time Lows?

By Rick Munarriz – Nov 28, 2018 at 8:30AM

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The maker of high-end wireless audio systems hits fresh lows after moving sharply lower over the past six trading days. It's time to turn up the volume.

Sonos (SONO -0.79%) didn't get much of a victory lap after posting blowout financial results in its first full quarter as a public company earlier this month. The stock rallied on the news, but the good times didn't last. Investors have now been treated to six consecutive trading days of declines, losing 26% over that time. 

The shares hit another all-time low on Tuesday. Sonos stock has only been trading for less than four months, so hitting a new low point may not seem all that extreme. However, the sell-off over the past week and change has turned the recent market debutante into a broken IPO again. No one said it was easy being a rookie when the market's getting jittery. 

A white Sonos speaker next to a smartphone running the Sonos app.

Image source: Sonos.

Lost and sound 

Retail investors have seen ups and downs in their brief run as shareholders. Sonos hit the market in early August at $15, only to close north of $20 on its second day of trading. But the gains didn't last. Sonos has spent most of its publicly traded life in the teens and more recently in the pre-teens. The shares bounced back from Tuesday's fresh low of $11.09, but it remains a rough trading day or two away from falling into the single digits. 

It's easy to see why the stock took a hit over the summer, when it served up its disappointing fiscal third-quarter results. Despite being explicitly projected in its prospectus, it's hard to cheer a 7% decline in revenue, because the period was stacked against strong showing a year earlier following the release of a new big-ticket accessory. 

The climate was far kinder this time around, with revenue soaring 27% in its fiscal fourth quarter, well ahead of the 14% to 17% increase it was targeting over the summer. Sonos also posted a much narrower quarterly deficit than what the Wall Street pros were modeling. Guidance was a letdown, with Sonos forecasting a mere 3% to 6% in top-line growth for the current quarter.

But investors can't let the seasonal lumpiness get in the way bigger picture. Despite perpetually shifting audiophile tastes and the recent influx of tech giants that are putting out cheap smart speakers, Sonos has managed to grow its revenue for 13 fiscal years in a row. And despite the slow start to fiscal 2019, Sonos sees 10% to 12% in top-line gains for the entire fiscal year.

There are no major analyst downgrades or knocks on its fundamentals weighing on Sonos stock during the recent sell-off. The stock is just flat-out trading for less than it was earlier this year, when Sonos was hoping to price its IPO between $17 and $19, or when it disappointed in its fiscal third quarter. It's a competitive landscape out there, but Sonos has proved itself adept at carving out a niche in the high end of the audio systems market. When the market bounces back, it won't be a surprise to see Sonos stock bounce even higher.  

Rick Munarriz 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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