What happened
Week to date, shares of Sonos (SONO 3.39%) were down 27% through Friday morning, according to data provided by S&P Global Market Intelligence. The last year has been challenging for this leading brand of wireless home audio products. After reporting strong double-digit revenue growth through 2021, the bottom started to fall out as inflation ramped up last year.
Certain areas of the economy are holding up well in this environment, but home audio is not a high priority for consumers right now. Sonos reported a 24% year-over-year decrease in revenue for the fiscal second quarter ending April 1.
NASDAQ: SONO
Key Data Points
So what
Investors were hopeful of a recovery, as the stock was up 24% year to date heading into the company's earnings report released on Wednesday. But after a disappointing quarter, what's next for the company?
While the quarter went about as management expected, the company reduced its full-year revenue guidance. It now expects revenue to be down between 4% and 7% over fiscal 2022, or 2% to 5% on a currency-neutral basis. This compares to the previous outlook ranging from a 3% decline to 3% increase over last year.
With those expectations, the stock could remain under pressure until the market sees improving demand.
Now what
The stock could be worth buying at the right price. Sonos is a leading brand in a growing market. The U.S. home audio equipment market is expected to grow at a 10% annualized rate over the next 10 years, according to Future Market Insights.
Home audio is not recession resistant, but when times are good and consumers are spending money, expect Sonos to perform well. From that perspective, the stock could be a smart contrarian bet. But expect more volatility until revenue shows better stability.
