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Sonos released it's first earnings report Monday after going public and it exposed all the risks of IPO's, technology and stockmarket whims. The rollercoaster saw $SONO close up 13% and then crash 20% after the release.

Sonos

Sonos Inc NASDAQ: SONO· Missed Earnings After Close Monday

 ($0.45) Missed ($0.26) EPS And $208.4 million Met $208.0 million forecast in revenue. 

Earnings 

Sonos reported a net loss of $27 million, or 45 cents a share, on sales of $208.4 million,worse than the loss of 26 cents a share on revenue of $223.1 million in the same quarter a year ago but matching expectations for revenue. Adjusted Ebitda was a loss of $1.5 million less than a year ago profit of $2.3 million.

The company said that it expected to end the fiscal year with total adjusted Ebitda of $59 million to $62 million on revenue of about $1.11 billion, roughly in line with analyst estimates. 

Sonos Inc NASDAQ: SONO

Market Reaction $18.91 USD −$4.33 (20.41%) Sep 11, 9:35 AM EDT

Highlights

  • Sonos, reported year-over-year growth in total unit sales, selling 886,514 products in the third quarter, an increase of 11.4% and $208.4 million in revenue.
  • Sonos was also affected by stock-based compensation of US$10.3mln, as well as a number of other related expenss.

Chief Executive Patrick Spence wrote that the timing of new product launches was to blame for the dip in revenue. He focused on potential growth from the company’s recent expansion into the Japanese market,  the second-largest music market in the world and a broader integration with streaming platforms ahead of the upcoming holiday season.

Jeffries Analyst Brent Thill Note on Sonos

Brent Thill, an analyst with Jefferies, said it was fitting that the newly public company more or less evened out by Monday’s end  given its steady growth. Revenues increased 11% through the nine months leading up to June, compared with the same period in 2017. “They don’t have any new gadget that’s causing a stampede effect,” Thill said, “but we think they’re executing well.”

Filings made in July, in preparation for the IPO showed that Sonos’ smart speakers rely heavily on the technology of one of its biggest rivals in the market. Their voice recognition functionality, which allows users to control devices just by speaking, runs on Amazon’s Alexa.

The obvious concern is $AMZN could decide to pull that integration, or start charging Sonos for the privilege, at any time. Sonos speakers occupy a higher tier of the wireless home entertainment market than Amazon Echo or Google Home products. With prices for multi-room Sonos systems running into the thousands of dollars, the products are targeted toward customers who value a full home-theater experience. “My 75-year-old parents are probably fine with the Amazon product for streaming their music,” Thill said. “For certain consumers, that’s not good enough.” The risk remains that a behemoth such as Amazon or Google could decide to compete in higher-end equipment and use its vast cash reserves to undercut the smaller company’s prices and quickly dominate the segment.

For now, though, Amazon seems content to leave Sonos alone. “Our sense is that Amazon sees Sonos as a channel,” Thill said. “Sonos is in 7 million homes, and that gives Amazon a lot of inputs for commerce” since any Alexa-enabled speaker can be used to purchase products from Amazon.

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