Analysts Like The Sound Of The Beat At Sonos

Sonos, Inc. SONO stock was down more than 13 percent Thursday despite a strong earnings beat and its most profitable-ever quarter as the market appeared to be spooked by the announcement that its chief financial officer is retiring.

But analysts reiterated bullish outlooks on the stock, saying the signal from the speaker maker remains clear and retiring CFO news is basically just noise.

Raymond James: Strong Earnings Report, Big Picture Intact

Sonos reported revenue and earnings that beat Street estimates and continues to grow by double digits despite competitive threats, Raymond James’ Adam Tindle wrote in a note. It’s also moving into a period of branching out into products outside traditional home audio and has had good expense management.

The announcement that Chief Financial Officer Michael Giannetto plans to retire and expectations for lower revenue in the second quarter shouldn’t outweigh the company’s strengths, Tindle said.

“While shares may come under pressure due to the optics of a CFO retirement (not resignation) and F2Q numbers coming down, the big picture (including FY19/20 estimates) remains intact, and we think it would be too early to jump ship ahead of scaling the platform into new markets with potential meaningful product cycles on the come," he wrote in a note.

Tindle maintains an Outperform rating but lowers his price target to $19 from $21.

Morgan Stanley: Starting to Get "Amped" on New Products

Morgan Stanley’s Yuuji Anderson expects new Sonos products to drive growth in the customer base and broaden what customers are buying, especially outdoor speaker options. The company also stands to benefit from its new Amp product bundled with its first move into passive speakers.

“Diversification across product categories, target customers and accelerated product releases keep us positive on growth prospects for FY19/FY20,” Anderson wrote in a note.

Anderson keeps an Overweight rating on Sonos with a $15 price target.

CEO Speaks

Sonos CEO Patrick Spence talked up the company’s near-term outlook in an appearance on CNBC, touting the company’s report that its home theater business grew by 42 percent year-over-year and reminding the market that the recently ended quarter was the most profitable in the company’s history.

“We’re up to 8 million homes we’re now filling with music,” Spence said. “We’re feeling good about the momentum in our business.”

Spence noted speakers are growing as a consumer product not just because of people listening to music, but also higher numbers of listeners using them for podcasts, audio books and streaming services: “This is the golden age of audio."

Spence also used the appearance to clarify the company’s plans on manufacturing in China after Axios reported the company could move work out of the country if the trade war escalates.

Spence said the company is making sure that its supply chain is global, “given all the tariff noise.” But, he said, “We’re not moving out of China. China’s a great manufacturing base for us.”

Shares trade down 13.2 percent to $10.73 at time of publication.

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Photo courtesy of Sonos.