Based in Santa Barbara, California, Sonos (SONO) is a leading brand of multi-room wireless home audio technologies. Probably, it is the most popular.
These audio technologies consist of wireless and home theater speakers, plus several components and accessories. These are sold in North America and overseas through 10,000 third-party retail stores and the online channel, including its sonos.com website.
In the past three months, shares of Sonos have fallen significantly, giving away more than 20% of its market valuation. This downturn can probably be explained by some profit-taking activities.
The company’s fundamentals look okay, so investors shouldn’t be concerned too much about the recent drop. Market perspectives bode well for this company. Thus, I am bullish on this stock. (See Analysts’ Top Stocks on TipRanks).
Fiscal 2021 Financial Results
Despite supply chain crunch headwinds, the company reported record numbers in households using Sonos products and existing customers’ repurchase habits. Furthermore, Sonos products per household also increased.
So, the results for total revenues, profit margins, and earnings were positive, leading each of these higher on a year-over-year basis in the final quarter and to a record in Fiscal 2021.
For Fiscal 2021, total revenues came in at $1.72 billion, up nearly 30% year-over-year.
The adjusted EBITDA margin increased 800 basis points to a 16.2% rate of total revenues.
The adjusted diluted earnings were $1.77 per share, reflecting a 164% jump from Fiscal 2020.
Market Perspectives
The demand for multi-room audio products is robust and should remain like this for many years ahead.
The number of people who love to listen to music and control their favorite tracks at home through multiple devices is increasing enormously.
Just pay attention to how many commercials about this product the TV channels send on-air to have a rough idea of how well this market is performing.
As a leader in the market, Sonos is well-positioned to benefit from expected higher demand tailwinds. The Q4 and Fiscal 2021 report suggests that Sonos’ products are becoming increasingly popular among consumers.
The company is confident about reaching steady growth in revenues, margins, and operating cash flows from now through 2024. Plus, the COVID-19 crisis-related issues created a pent-up demand that can deliver incredible value for Sonos and other market leaders as soon as the wide industry supply chain crunch passes.
Looking Ahead to Fiscal 2022
Sonos projects a 12% to 16% year-over-year growth in total revenues, reaching $1.93 billion to $2 billion.
While, the adjusted EBITDA margin rate, according to the company, should be between 14.5% and 16.2% of total revenues.
Wall Street’s Take
Three Wall Street analysts have issued a 12-month price target for SONO in the past three months.
The average Sonos price target is $50.33, implying 63.5% upside potential. The company has a Strong Buy consensus rating, based on three unanimous Buy ratings.
Summary
The demand for products of Sonos and other leading brands is expected to continue growing rapidly. Sonos should benefit from its popular brand.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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