Sonos Stock Sounds Cheap Down Here

Speaker and audio products maker Sonos, Inc. NASDAQ: SONO stock has fallen (-26%) for the year selling off with the rest of the bear market. The audio products maker continues to grow both top and bottom lines. Stay-at-home mandates and lockdowns spurred growth in home theater and entertainment audio products as consumers spent more time at home during the pandemic. As workers return to the office, sales momentum has slowed from its 90% tepid growth to 20% top line growth in its latest quarter. The Company says that growth was strained by supply chain constraints coming from COVID lockdowns in China. Consumer demand remains strong as evidenced by the backlog for 2022, which should clear up as lockdowns get released. Higher component and logistics costs unscored the inflationary pressures in the quarter. The Company continues to grow new customers through word of mouth from existing customers emphasizing that Sonos products are not a one-and-done purchase. The Hollywood at Home tailwinds should continue to be a strong growth driver moving forward. Prudent investors looking for a foothold in the audio products segment can watch for opportunistic pullbacks in shares of Sonos.

Q2 Fiscal 2023 Earnings Release

On May 11, 2022, Sonos released its fiscal second-quarter 2022 results for the quarter ending March 2022. The Company reported an earnings-per-share (EPS) profit of $0.26 excluding non-recurring items versus consensus analyst estimates for a profit of $0.17, beating estimates by $0.09. Revenues rose 20.1% year-over-year (YoY) to $399.8 million beating analyst estimates for $351.78 million. Sonos CEO Patrick Spence commented, “We are pleased to report record Q2 revenue of $399.8 million, representing 20% growth over last year. Our Adjusted EBITDA of $46.9 million illustrates our continued ability to deliver sustainable, profitable growth despite the ongoing, industry-wide supply constraints and rising cost pressures. Our consumer demand remains strong, and we announced three exciting new products today. While the world remains unpredictable, we remain confident that we can deliver another record-setting year in Fiscal 2022.”

Fiscal 2022 Outlook

Sonos provided its outlook for the rest of fiscal 2022. Adjusted EBITDA range of $290 million to $310 million representing growth of 4% to 11% was narrowed from 4% to 17% range. The Company maintains its revenue outlook in the range of $1.95 billion to $2 billion representing 14% to 16% growth.

Conference Call Takeaways

CEO Spence stated that growth is only constrained by supply as consumer demand remains very strong and the Company achieved an EBITDA of $47 million in the quarter despite inflationary pressures. Higher component and logistics costs were offset by the strong demand. He stated that word of mouth continues to be the top driver of new customers from existing customers’ passionate evangelism of its products. Technical innovations continue to predictably trigger existing customers to return for upgrades and new products which is the flywheel core of growth. The Company launched Ray, its new compact soundbar, which delivers acoustic innovations and crisp dialogue that demonstrates simplicity and versatility at a more accessible price point to draw new customers. Sonos voice control will be available on June 1, 2022, enabling any voice-capable Sonos speaker to work seamlessly entirely on the device. The Sonos Roam is its ultraportable smart speaker that launched in three colors olive, sunset, and wave. He sees three macro trends in the Golden Age of Audio, Hollywood at Home, and the Great Reshuffling, that are expected to generate significant tailwinds.

SONO Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for SONO stock. The weekly rifle chart downtrend is attempting to bottom out below the $19.66 Fibonacci (fib) level. The weekly 5-period moving average (MA) resistance is being tested at $22.06 while the weekly 15-period MA continues to fall at $24.71. The weekly 50-period MA resistance is falling at $30.15. The weekly lower Bollinger Bands (BBs) sit at $19.18 as the weekly stochastic fell through the 20-band and is now stalling for either a cross up or mini inverse pup down. The weekly market structure low (MSL) buy triggers on the $22.56 breakout. The daily rifle chart is attempting to breakout as the rising 5-period MA at $20.67 attempts to crossover up through the 15-period MA at $20.86. This is powered by the daily stochastic cross back up off the 30-band. The daily lower BBs sit at $17.90 ,and the daily upper BBs sit at $24.94 just above the daily 50-period MA at $24.37. Prudent investors can watch for opportunistic pullback levels at the $20.56, $19.66 fib, $18.92, $17.68, $16.93 fib, $15.71 fib, and the $14.68 fib level. Upside trajectories range from the $25.40 fib up towards the $32.25 fib level.