Sonos (SONO 0.77%) has had a long year, and it's only the first week of February. The wireless audio pioneer has had a couple of hiccups so far in 2020, but it seems as if investors are willing to look the other way after Sonos came through by posting another blowout quarter after Wednesday's market close.
The first stumbling block was when Sonos announced that it would stop supporting some of its older products, and that their overall functionality could eventually be disrupted. Sonos offered a 30% discount on new orders for customers upgrading their legacy audio equipment, but the backlash was severe. Sonos eventually caved, agreeing to keep the older gear working as it does today instead of going the way of the forced obsolescence. A smaller mishap recently took place in which hundreds of customers had their email addresses exposed to follow customers.
However, despite the two tactical blunders, shares of Sonos opened sharply higher on Thursday after the company posted better-than-expected financial results for its fiscal first quarter of 2020. Sometimes the best way to drown out unsavory external noises is to pump up the volume.
Image source: Sonos.
Sound check
Revenue rose 13% to hit a record $562.1 million for the holiday-season fiscal first quarter at Sonos, and that number would be 15% higher on a constant currency basis. Analysts were only holding out for a 10% uptick. The bottom line grew even faster, up 15% to $70.8 million, or $0.60 a share. Analysts were bracing for a decline in profitability.
The unexpectedly robust showing on both ends of the income statement is pushing the stock to fresh 52-week highs today. Nothing helps a company overcome public relations blunders better than blowout financial performances, but we're not out of the woods just yet. If there are any negative ramifications to upsetting longtime customers with the January legacy products-busting stunt that it eventually dialed back, we won't see that until the current quarter.
One can argue that Sonos sticking to its full-year guidance this week despite a strong fiscal first quarter is giving itself some wiggle room if things get choppy in the near term. Sonos continues to expect to generate between $1.365 billion and $1.4 billion in revenue in fiscal 2020, representing 8% to 11% growth. With the head-turning 13% top-line surge in the fiscal first quarter now in the books, it implies that revenue growth will slow to the high single digits for the balance of the year.
The good news here is that Sonos has been historically conservative with its outlooks. It sold more than 2.9 million products during the holiday quarter -- a 22% spike over the prior year. New products and a strong start to the SYMFONISK line that it launched exclusively through IKEA last summer are proving that Sonos can stand out in a world where better-financed tech giants are trying to make a splash in the low end of the home audio market.
After 14 consecutive years of posting double-digit revenue growth -- a streak that would end if it lands at the low end of its fiscal-year guidance -- Sonos came through with a monster quarter in its push to stretch the winning run to 15 years. The new quarter will be pivotal in justifying this week's new highs, and all bets are naturally off if we swan dive into a global recession. It's been a wild first few weeks of 2020 for Sonos, but it's hard for investors to complain with the stock trading higher than it has since shortly after its 2018 IPO.
