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

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.

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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.