Sonos (NASDAQ:SONO) is having a rough rookie year as a publicly traded company, but the future may be brighter than the past. Morgan Stanley analyst Yuuji Anderson upgraded shares of Sonos on Monday, lifting his rating from equal weight to overweight.
Anderson feels the new products rolling out later this year should expand the wireless speaker pioneer's reach. A partnership signed with IKEA a year ago should bear new fruit this summer when the two companies launch the Symfonisk line of smart speakers in August. Anderson feels that the lock-up expiration on Tuesday could result in some selling pressure on the shares, but upgrading the stock a day ahead of the lock-up expiration isn't a coincidence. With the shares still trading below last year's IPO price, it's not as if there will be a lot of excitement of investors cashing out after a not-so-hot debut.
Turning up the volume
Sonos hit the market last summer at $15, and while the initial buzz sent the shares north of $20 in each of its first three days of trading, it's been mostly downhill ever since. The stock has been stuck in the pre-teens and single digits through the past couple of months.
The consumer electronics specialist is growing, even in a climate that many consider challenging given all of the tech titans that have rolled out voice-activated smart speakers. Sonos stock bounced back after a rough first quarter as a public company, posting a 27% surge in revenue in its fiscal fourth quarter. Guidance for the current quarter was disappointing -- with Sonos modeling 3% to 6% top-line growth -- but it sees a 10% to 12% gain in revenue for all of fiscal 2019.
Monday's analyst upgrade is relative. Anderson is actually lowering his price target from $20 to $15, a testament to how hard the stock has fallen since its first few weeks as a celebrated IPO. There are plenty of reasons to be worried given the tech heavyweights subsidizing their gadgetry to grab market share, but Sonos still has history and a brand name on its side. It has managed to grow its revenue 13 years in a row, and its guidance calls for easily extending its winning streak to 14 this year. It may be disappointing to see that a new bull's price target is exactly where Sonos went public more than five months ago, but going by today's depressed price levels there's plenty of upside for investors on the way back to last summer's starting line.