SONO - Embedded Expectations Analysis - 2021 03 10
Sonos, Inc. (SONO:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 31.8x Uniform P/E, implying bullish expectations for the firm. Meanwhile, although management may have concerns about DTC demand, marketing investments, and margins, market expectations are still too pessimistic, suggesting long-term equity outperformance remains warrantedSpecifically, management may be overstating the sustainability of demand for their direct-to-consumer (DTC) products and the opportunities to continue to capitalize on home audio content consumption. They may also have concerns about increases in their operating expenses due to investments in sales and marketing. Moreover, they may lack confidence in their ability to sustain their system products revenue growth, maintain strong profitability and cash flow from working capital, and improve their gross margins
Although management may have concerns about DTC demand, marketing investments, and margins, market expectations are still too pessimistic given the firm's significant growth opportunities. As such, long-term equity outperformance remains warranted
Sonos designs, develops, manufactures and sells multi-room audio products. The Sonos home sound system provides customers with a listening activity created by the design of its speakers and components, a proprietary software platform and the ability to stream content from a variety of sources over the customer's wireless network or over Bluetooth. The company's products are sold via third-party retail stores, including custom installers of home audio systems. The company also sells via select e-commerce retailers and its website sonos.com. The company's products are distributed through its wholly owned subsidiaries: Sonos Europe B.V., Beijing Sonos Technology Co., Ltd., Sonos Japan GK and Sonos Australia Pty Ltd.
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