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How Sonos Shares Fell 12% in August

By Anders Bylund – Sep 8, 2020 at 2:03PM

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The company is selling smart speakers faster than it can make and distribute them, so last month's earnings report fell short of some Street targets.

What happened

Shares of Sonos (SONO -2.65%) fell 12.1% in August 2020, according to data from S&P Global Market Intelligence. The pioneering maker of smart speakers entered the month on a strong tailwind of bullish analyst reports, but the third-quarter report on August 5 failed to impress investors.

So what

Sonos' sales fell 4% year over year to $249 million, while net losses quadrupled to $0.52 per share. Your average analyst had been looking for a net loss near $0.27 per share on revenue in the neighborhood of $236 million, so it was a mixed report compared to Wall Street's expectations.

Share prices fell 22% over the next two days. Noted short-seller Citron Research boosted Sonos share prices by 18% in June when they argued that the stock was undervalued and perhaps a good buyout target for Apple (AAPL -3.26%).

A red charting arrow trending downward.

Image source: Getty Images.

Now what

The earnings report didn't support Citron's bullish argument. Sonos is constantly sold out of its seven most popular products, but that's an example of high demand meeting a damaged supply chain. The company is having trouble putting speakers on store shelves due to fallout from the COVID-19 pandemic, mostly related to virus-based government restrictions in Malaysia. Sonos wants to move much of its manufacturing into Malaysia from its current facilities in China, and the pandemic is delaying that effort until the middle of 2021.

I am tempted to invest in Sonos myself at these bargain-bin prices, with the understanding that this stock will go through another quarter or two of potholes and supply-chain difficulties. It's a solid long-term bet, after all.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Sonos Inc. The Motley Fool has a disclosure policy.

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Sonos Inc Stock Quote
Sonos Inc
$14.30 (-2.65%) $0.39
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