Should You Buy Sonos Stock After 70% Rally This Year?

by Trefis Team
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Sonos (NASDAQ:SONO), a company best known for its multi-room home speakers, has seen its stock rise by about 4% over the last week (five trading days). The stock is also up by a solid 70% year-to-date. In comparison, the S&P 500 is up by about 2% and 10% over the last week and year-to-date, respectively. The recent gains come as the company upped its long-term guidance during an investor event in March while looking to expand its presence beyond the home market into the automotive audio, portable speaker, and headphone space. Over the last month, Sonos unveiled a new and more affordable portable speaker called the Roam and said that it was working with Audi to provide Sonos-tuned audio for a new electric vehicle. So is Sonos stock poised to rally further or is a correction looking imminent? Based on our machine learning engine, which analyzes Sonos stock’s historical price movements, the stock has a 55% chance of a rise over the next month, after rising by about 4% over the last five trading days. See our analysis on Sonos Stock Chances Of Rise for more details.

Now, is Sonos stock a buy for longer-term investors? The company expects revenue to rise to about $2.25 billion in fiscal 2024 (FY ends September). This marks a CAGR of about 13% from the mid-point of its 2021 guidance of $1.55 billion. The company’s previous outlook estimated a growth rate of about 10%. Separately, Sonos’ margins outlook is also encouraging, with gross margins projected to stand at between 45% to 47% in FY’24, up from levels of about 43% in FY’20. At its current stock price of about $42 per share, Sonos trades at just about 3.2x projected 2021 Revenues. We think that’s a reasonable valuation considering the company’s improved growth and margins outlook, expanding addressable market, and its loyal (and relatively locked-in) customer base.

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