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Sonos Stock Keeps Pumping Up the Volume

By Rick Munarriz – Updated Sep 15, 2021 at 9:27AM

Key Points

  • Sonos is raising prices by 6% to 13% this week, passing along recent cost increases.
  • One analyst sees forward revenue estimates from his peers as conservative. That's an easy call to make, given Sonos' knack for "beat and raise" quarters.
  • Sonos shares have popped nearly sixfold since its pandemic low last year, and the stock is probably not done.

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The wireless audio pioneer is raising prices, and that's a good thing for investors.

Inflation has hit the audiophiles. Sonos (SONO -1.01%) boosted prices for its products earlier this week, and at least one analyst sees that as a good thing. Brent Thill at Jefferies put out a bullish note on Tuesday, framing the 6% to 13% pricing increase for Sonos' speaker systems and related audio gear into financial perspective.

Thill estimates that the increase averages 7.3% across the lineup. It's not a money grab on behalf of Sonos. Component and shipping costs are also moving higher, and this is a justifiable way to keep margins in check. With the updated pricing, Thill thinks the $1.86 billion consensus revenue forecast for the new fiscal year that kicks off in two weeks -- translating into 8.5% top-line growth -- is too conservative. Given the "beat and raise" knack that Sonos has feasted on lately, that was probably going to be the case even if it didn't come firing with a pricing gun this week.

A two-room slice of a home with an IKEA SYMFONISK table lamp that is also a Sonos speaker.

Yes, even the Ikea table lamp in this setting is a Sonos wireless speaker. Image source: Sonos.

Sounds good

Thill has a buy rating on the shares. His $50 price target implies 38% of upside from Tuesday's close. 

It has paid to be bullish on the wireless audio pioneer lately. The stock is nearly a six-bagger since bottoming out like so many other growth stocks did in March of last year. It's not just a survivor in a niche of multiroom wireless audio systems that now has with the world's largest tech giants trying to wedge in with their own smart speakers. Sonos is thriving as a long-term winner, too.

Sonos has rattled off 15 consecutive fiscal years of annual revenue growth, and by the end of this month it will stretch that winning streak to 16 fiscal years of positive top-line moves. The guidance it offered in early August calls for 28% to 29% top-line growth for fiscal 2021, climbing to as high as 31% if you back out the extra week in fiscal 2020. 

If it seems like a buzzkill to have analysts go from expecting roughly 30% growth this fiscal year to just 8.5% for the upcoming fiscal year, pull up a chair, and let's take a brief trip back in time. Back in October of last year, when Sonos was delivering financial results for the fourth quarter of fiscal 2020, it was modeling only 9% to 13% in revenue growth for fiscal 2021. Three months later, Sonos was eyeing 15% to 19% in revenue growth, and it seems as if a quarter doesn't go by without an upward guidance revision.

Sonos always finds a way to grow. It survived having the titans of tech aim at its audiophiles. It put out differentiated products and kept growing with a premium brand that commands respect in this widening niche. It also made the most of the pandemic by beefing up its consumer-direct business and rolling out new products to cash in on folks who were spending more time at home. 

This isn't just a revenue growth story. Sonos has blasted through Wall Street's profits with ease, and it hasn't even been close lately. We're talking about double- and even triple-digit percentage beats on the bottom line over the past year. Market-thumping growth is a hallmark of great growth stocks

One analyst thinks his peers are aiming too low in sizing up Sonos and its growth prospects. He's probably right, and even he is probably underestimating the eventual financial reality. History tells us that Sonos always finds a way to keep winning. 

Rick Munarriz owns shares of Sonos. The Motley Fool owns shares of and recommends Sonos. The Motley Fool has a disclosure policy.

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