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Why Sonos Stock Jumped Monday

By Daniel Sparks - Aug 19, 2019 at 12:01PM

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One analyst thinks Sonos shares could soar.

What happened

Shares of wireless speaker system company Sonos (SONO 4.24%) jumped on Monday, rising as much as 13.4%. As of 11:11 a.m. EDT, the stock was up 11.6%.

The stock's gain follows an analyst upgrade Monday morning. A Raymond James analyst upgraded the stock from a market perform rating to strong buy.

A chart showing a stock price moving higher

Image source: Getty Images.

So what

Raymond James analyst Adam Tindle set a 12-month price target of $19 for Sonos stock. Even after the stock's jump today, this implies over 40% upside.

"Consider, Sonos currently trades in the same zip code as niche product company GoPro, and unprofitable company Arlo, yet Sonos has a two year revenue [compound annual growth rate] that is essentially double these companies and has done so while improving [EBITDA] margin and generating positive cash flow," the analyst wrote (via MarketWatch).

Earlier this month, Sonos reported fiscal third-quarter revenue of $260 million, up 25% year over year. The company's adjusted EBITDA was $7 million, up from a loss of $2 million in the same quarter last year. 

Now what

The company is certainly seeing some notable business momentum -- enough for management to boost its full-year fiscal 2019 outlook when it reported its fiscal third-quarter results. Management said it expects revenue during the period to be between $1.250 billion and $1.260 billion, up from a previous forecast for revenue between $1.250 billion and $1.275 billion. In addition, the company said it now expects its gross margin to exceed its previous gross margin guidance for 40% to 41% by about 100 basis points.

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