Sonos Stock Up 3% Today – Time to Buy SONO Stock?

The price of Sonos stock is surging 3% today in pre-market stock trading action while the stock is up 3% for the month thus far following the release of the firm’s earnings report covering the fourth quarter of its 2021 fiscal year.

For the three months ended on 2 October, the company reported total revenues of $359.5 million resulting in a 5.8% jump compared to the same period a year ago as the positive trends that lifted the company’s performance during the pandemic seem to keep playing in its favor. Analysts surveyed by Capital IQ were expecting sales of $360.2 million.

In this regard, Sonos Chief Executive, Patrick Spence, commented: “Demand for our products remains stronger than ever, and we are entering fiscal 2022 with a significant backlog due to the continued industry-wide supply constraints”.

He added: “Despite these supply constraints, we expect to deliver another strong year in fiscal 2022, including 16% revenue growth and 17% adjusted EBITDA growth at the high end of our outlook”.

Higher demand for the company’s speakers drove most of the top-line uptick while the EMEA market displayed the strongest performance as sales there landed at $137.94 million compared to $117.08 million the company reported during the fourth quarter of the 2020 fiscal year.

Notably, sales in the Americas region during this fourth quarter, slipping from $199.5 million last year to $196 million for these last three months.

Sonos reported adjusted diluted earnings per share of $0.08 compared to $0.33 it reported last year. This figure was 2 cents lower than the Street’s estimate as per Capital IQ.

Even though Sonos’s results during the fourth quarter showed signs of a potential stalemate in the firm’s latest positive performance, the announcement of a $150 million stock repurchase program is contributing to lift the price of Sonos stock this morning.

What can be expected from this California-based audio devices manufacturer in the near future? Join me in this article as I take a look at the price action and fundamentals of SONO stock to possibly answer that question.

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Sonos Stock – Technical Analysis

Back in August when I last wrote about Sonos, I highlighted the possibility that the price could surge to the $45 level amid the positive performance of the firm during the third quarter of the 2021 fiscal year.

However, concerns about the impact of the ongoing supply chain crisis on the company’s ability to keep up with increasing demand for its devices contributed to pushing the price of SONO stock lower and the rally ended up fading.

What the chart is displaying now is a potential triple bottom formation at the $31 level as the price has bounced off this threshold. The share buyback announcement could catalyze a move toward the upper trend line highlighted in the chart at around $40 per share for a 19.4% upside potential.

Similar to what happened back in August, the short-term moving averages have just posted a golden cross and both the Relative Strength Index (RSI) and the MACD are displaying bullish setups as the former should jump above 50 if the pre-market uptick spills over to the live session while the latter has moved to positive territory in the past few days.

All things considered, the current setup is favoring a bullish outlook for Sonos stock as long as the price remains above the 20-day and 50-day simple moving averages.

Depending on what happens next, if the price moves above the $40 level a potential bull flag pattern could be in play and that may lead to the continuation of the former uptrend in the following months.

Sonos Stock – Fundamental Analysis

For the full 2021 fiscal year, Sonos reported a 29% increase in its revenues – which landed at $1.72 billion – while its gross margins continue to be quite positive at 47.2%. Meanwhile, adjusted earnings per share landed at $1.77 compared to $0.67 last year.

For the upcoming 2022 fiscal year, the firm is expecting to report sales of up to $2 billion resulting in an expected 16% year-on-year jump while gross margins should remain near the 47% threshold.

According to analysts’ estimates for this upcoming fiscal year, the firm’s earnings per share may land at $1.63 resulting in an 8% decline compared to the 2021 fiscal year.

Based on Sonos’s current market cap of $4.2 billion, its share buyback program represents around 3.6% of the company’s float. This explains why the stock is surging by around 3% this morning. Other than that, Cronos seems to be suffering from a fading pandemic tailwind.

Currently, the stock is trading at 23 times its forecasted earnings per share for the next 12 months while its EV/EBITDA ratio using the management’s forecasted adjusted EBITDA figure for 2022 is standing at 11. This ratio is lower than the average of 17.5x assigned to companies that manufacture consumer electronics.

Even though the valuation seems attractive from a fundamental standpoint, especially if one considers that the firm has no debt, earnings growth for Sonos may have temporarily topped and that could limit the upside potential of the stock as we move forward into the 2022 fiscal year.

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