![]() In comparison, the S&P 500 has declined by under 1% over the same period. Sonos, a company best known for its multi-room speakers and home theater systems, saw its stock decline by about 3% over the last week (five trading days) and has moved by about -15% over the last two weeks. This means that Sonos’ profitability is likely to grow meaningfully as sales expand. Sonos’ margins have also been trending higher, with gross margins for the first nine months of FY’21 standing at 47.4%, up from 41.6% in the same period last year. It’s very likely that the company will enter the headphone market as well. Sonos is also expanding beyond its core home audio market, with the launch of its new Roam portable speakers and its partnership with Audi for in-car entertainment. Sonos previously indicated that its customers have almost three Sonos products at home on average, and the company is looking to increase this to four to six products in the future. Longer-term growth should also hold up, driven by the company’s strong platform effect, with customers typically repeating purchases to expand their Sonos systems. Firstly, Sonos’ growth should remain strong, with sales projected to rise by as much as 29% this year. So is Sonos stock still worth a look at current levels of about $40 per share? Sonos stock currently trades at under 3x projected 2021 revenues and we think this is a relatively reasonable valuation for a couple of reasons. While the full ruling isn’t available yet, the development is positive and indicates that Sonos could potentially monetize its patents down the road, in what could be a lucrative business. International Trade Commission, as a judge found that the Internet behemoth infringed on five of Sonos’ patents. Moreover, the company won the first round of its patent case against Google at the U.S. Sonos also raised its full-year guidance, projecting that revenues would grow between 28% to 29% year-over-year to between $1.695 billion to $1.710 billion. Q3 revenue rose 52% to $378.7 million, well ahead of consensus, while adjusted earnings stood at $0.27 per share, compared to a loss last year. Sonos stock has rallied by around 15% over the last week (five trading days) The rally comes as the company reported a stronger than expected set of Q3 FY’21 results as demand for home audio and home theater products continued to remain strong as people stay home through Covid-19. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) SOPA Images/LightRocket via Getty Images of audio products is seen on a smartphone and a pc screen. It's no surprise that investors are getting antsy.UKRAINE - 5: In this photo illustration the Sonos logo of a US developer and manufacturer. ![]() There's also no indication that global supply chains or chip shortages will be sorted out anytime soon. There's no exact blueprint for navigating these challenges, so the extent of damage is anyone's guess. The management team has made it no secret that the consumer audio company is impacted by supply chain disruptions, and the global semiconductor shortage is like playing a role here as well. Sonos recently announced new products, new programming on Sonos Radio, and price increases to existing products. Sonos acknowledged these challenges in its August earnings call, making it vulnerable to investor concerns about inflation. ![]() This is yet another instance of inflation driving up production costs, and it's unclear how much of that can be passed along to consumers. Sonos ( SONO 0.69%) shares lost 18.5% in September, according to data provided by S&P Global Market Intelligence, as investors reacted to the company's supply chain challenges and relatively high valuation. ![]()
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