Investors have gotten used to seeing the Nasdaq Composite (NASDAQINDEX:^IXIC) chart its own path, and Thursday was no exception. Even as other major market benchmarks headed lower, the Nasdaq managed to post gains of 0.3% as of 12:45 p.m. EST, once again demonstrating why it has been able to provide so much outperformance throughout 2020.
Among top Nasdaq stocks, Tesla (NASDAQ:TSLA) continued to get a lot of attention from investors, many of whom appear to be positioning themselves ahead of the forced buying from index fund managers next month. Yet the truly large gains were reserved for Sonos (NASDAQ:SONO), which released extremely encouraging financial results that make the speaker maker sound like an interesting investment to many.
Can Tesla keep climbing?
Tesla shares were up another 2% early Thursday afternoon, after having been up as much as 5% earlier in the session. At its best levels of the day, Tesla touched all-time highs above the $500 per-share mark.
Tesla has gotten a lot of attention lately because it finally received a long-awaited invitation to join the S&P 500 index. The move is planned for late December, although it could come in two different installments. What that means for current shareholders is that there'll be considerable demand from mutual funds and exchange-traded funds that track the S&P 500, because they'll need to get exposure to Tesla in order to continue to track the new index's returns.
Many have criticized Tesla's valuation as being ridiculously high for an auto company. Yet increasingly, analysts covering the electric vehicle (EV) manufacturer are highlighting the value of Tesla's software development, including its Autopilot autonomous driving suite. One analyst set a price target of $540 per share, arguing that the recurring revenue from services associated with its vehicles could provide the next leg higher for Tesla's business.
In any event, Tesla will remain in the forefront of investors' minds at least until it joins the S&P 500. Beyond that, auto stock investors need to keep their eyes open to see how competitive dynamics in the industry keep shifting as more players seek to stake their claims to the fast-growing EV niche.
Meanwhile, Sonos shares skyrocketed 27%. The maker of wireless home audio products delivered extremely strong results in its fiscal fourth quarter, setting the stage for what it called an "inflection point" in its business model.
One of the most exciting things about the report was that Sonos made money. Adjusted earnings reversed year-ago losses, and even on an unadjusted basis, Sonos managed to post a healthy profit. Revenue climbed 16% year over year, with direct-to-consumer revenue soaring 67% from last year's period.
Sonos has enjoyed considerable success from its products and services. The Arc smart soundbar and other new speakers found solid demand, and the Sonos S2 app and operating system is playing a key role in driving business. Moreover, the ad-supported Sonos Radio service adds new revenue sources for Sonos and also increases its exposure. The total number of households with Sonos products rose 20% in fiscal 2020 to nearly 11 million, and listening hours were up by a third.
Sonos also gave investors an encouraging outlook for 2021, projecting revenue gains of 11% to 15% and continued rises in direct-to-consumer sales. That's exactly the kind of story Nasdaq investors like to hear, and it bodes well not just for Sonos but for growth stocks more generally.