Sonos’ Wall Street IPO Wasn’t a Disaster — But It Does Raise Some Serious Questions

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Sonos’ IPO didn’t crater — but the middling performance of the stock raises some questions concerning how well the smart speaker maker can perform against titans like Amazon and Google.

Shares were priced at $15 each on Wednesday and closed at $19.91 on Thursday.  The stock continues to rise into Friday, with the price hovering around $20.64 at the time of writing.

The company expected the stock to hover around $17 to $19 a share.

The company is valued at around $2 billion after the initial public offering, but sell-offs in the entire tech industry could be impacting the stock’s ability to rise.  CEO Patrick Spence said tech stocks are down 4% across the board, which has resulted in disappointing earnings for everyone in the tech field.

Spence also believes that investors have a hard time understanding that Sonos is more than just a hardware company.

The $2 billion valuation is far short of the $2.5 to $3 billion valuation that analysts expected before the IPO.

The tempered enthusiasm is based on fears that Sonos will struggle to compete as a single device manufacturer.

Other specialized tech stocks like Fitbit and GoPro are having a hard time distinguishing themselves from tech giants who make similar products. Their stock performance raises concerns about Sonos’ ability to maintain a healthy customer base as a specialized device company.

Investors have questions about the company’s business model, which is to provide high-quality and attractive smart speakers for the home.  The company says its customers on average listen to about 70 hours a month of music and other content. However, the speaker manufacturer is facing fierce competition from Amazon’s Echo line, Google Home, and even Apple’s HomePod series of speakers.

Echo is the current market leader with nearly 53% of the smart speaker market captured.  Some analysts are skeptical about SONO, saying that a great product isn’t always a great business decision.