What happened
Shares of Sonos (SONO +2.15%) were up 17% as of 1:02 p.m. ET on Thursday. The company delivered better-than-expected earnings results after the market close on Wednesday that sent the stock surging.
Over the last year, the stock lost around half its value in 2022 over slower revenue growth. Could 2023 be a better outing for the home audio brand?
NASDAQ: SONO
Key Data Points
So what
Consumers had an appetite to buy new wireless speakers for their home. Revenue grew 1.2% year over year and is up 20% over the same quarter three years ago. This was slightly lower than the 2.2% growth reported for the previous quarter. Excluding currency changes, the top line would have grown by 7% over the year-ago quarter.
Where the company surprised investors was its profit performance. Adjusted (non-GAAP) net income was still down year over year, but adjusted earnings per share came in at $0.79, significantly better than the $0.38 consensus estimate going into the quarter.
Sonos had plenty of product in stock to meet customer demand. CEO Patrick Spence noted that the company entered the quarter with the "healthiest in-stock inventory position in three years." This helped meet "tremendous customer response" to its products. Spence also said the company gained market share across its core categories.
Now what
Sonos expects revenue to be up 1% to 7% year over year in the fiscal second quarter on a currency-neutral basis. Management has several new products releasing this year to drive demand, but the guidance remains unchanged, as there still remains uncertainty about consumer spending.
The stock got pretty cheap in the fall but now trades at a more fair valuation of 26 times this year's earnings estimate. This higher valuation could limit gains in the near term unless sales growth accelerates, which investors should watch for as the year progresses.
