What happened

Snap One (SNPO 0.14%) stock underperformed the market this week. The smart tech specialist's shares were down by 9% through early Friday trading compared to a 2.6% increase in the S&P 500, according to data provided by S&P Global Market Intelligence. That decline only erased a small portion of Snap One's recent gains, though. Its shares are still up by more than 20% so far in 2023.

This week's drop came as investors reacted to conservative guidance from Snap One's management team.

So what

Executives said on Tuesday that sales rose 5% in its fiscal fourth quarter after adjusting for an extra sales week in the year-ago period. Cost cuts helped it moderate its bottom-line losses, too -- its net loss was down to 1.5% of sales compared to 2.9% a year earlier. "Our team's steadfast commitment to our growth strategy delivered positive results in 2022," CEO John Heyman said in the earnings press release.

Yet Snap One's executives are being cautious with their 2023 outlook. Management projected a sales decline of between 3% and 7% this year, along with falling earnings. "We believe that it is prudent to acknowledge and adjust to economic conditions," Heyman explained. Wall Street had been hoping for a more bullish outlook.

Now what

It is still possible that Snap One's initial outlook will turn out to be too conservative. Demand for smart tech products will be helped by its customers' innovation efforts, which continue to add exciting features in areas like audio and lighting control. Executives say they are confident in Snap One's long-term growth opportunities, given the industry's bright future.

Still, the prospects of a slow period ahead have investors feeling nervous, especially as the perception that the U.S. is increasingly likely to enter a recession raises the potential for more extreme sales declines in 2023 and beyond. That's no reason to abandon the growth thesis for this company, but it does suggest that more volatility is ahead for Snap One shares.