Final Trade Detail

Sonos

Investors who followed this trade Generated a

35.84% Return

Open Date

8/29/18

Close Date

11/20/18

Hold Time

81 Days

Buy Price

20.17

Close Price

12.94

%Gain/Loss

35.84%

Original Recommendation

Sonos

Sonos (SONO)

our opinion

sell

current price

$20.17

target price

$14.00

market cap

$1.90

div yield

0.00%

  • Sonos went public on August 2, 2018. The offering price was $15.
  • Sonos priced its IPO below the initial estimate of $17-$19/share.
  • Analysts are mixed with their ratings. Most have offered buy or hold ratings.

trade details

Investors have a voracious appetite for new high tech issues (IPO’s) in 2018. Roku went public in late 2017 and is up 352% from its initial price. CarGurus, MongoDB and SendGrid also went public late last year, and are up 212%, 192% and 116%, respectively, from their initial price.

It raises the question of what the heck happened with the Sonos IPO? The stock has traded in a very tight range since its IPO on August 2, 2018. On August 27th, analysts were finally able to offer their perspective on Sonos. The reaction was mixed and generally underwhelming. Let’s take a closer look at why analysts are lukewarm on the Sonos growth story.

Investors have a legitimate reason to believe Sonos is the next FitBit or GoPro. The smart speaker market is heating up – competitors include Google, Amazon, Apple and several existing electronics manufacturers. There’s no question Sonos has cornered the high-end speaker market. Sonos possesses multi-room music streaming technology that should give it an edge over rivals. However, major tech giants appealing to casual consumers are underpricing Sonos with similar offerings. This poses a major threat to Sonos’ ability to appeal to a broader market.

There’s a good reason to believe that Sonos IS NOT the next FitBit or GoPro. Those electronics companies saw an initial surge in popularity but waned as consumers lost interest in their products. The average Sonos customer listens to 70 hours of content per month, and nearly half of Sonos’ 7 million households use the Sonos app daily. This paints a rosy picture for Sonos customers who fall in love with their products. As tech giants begin to develop their smart speaker technology, can they catch up with the quality of Sonos? That’s the real concern that will weigh on the minds of investors.

We do love Sonos speakers, but that doesn’t mean we’re interested in holding shares of every company we love. We’re more pessimistic on Sonos’ ability to grow the top or bottom line. Shares are heading lower in coming months, and we want to profit as the share price slips to single digits. We recommend shorting shares or buying January 2019 put options with a $15 strike price.