Sonos is facing heavy turbulence on Wall Street after a less-than-stellar earnings report.
Sonos has been a pioneer in the market for wireless speakers and related services. But maybe the space for smart speakers is simply too crowded.
Last month, the company excited investors with its hardware-meets-tech pitch. SONO went public on the Nasdaq with an IPO of $15 per share, and the champagne bottles were uncorked. But concerns surrounded the long-term viability of a company that is ultimately competing with elephants like Amazon.
Accordingly, the stock has been very turbulent since the IPO. Prices have exceeded $23 per share, while also experiencing dramatic downturns.
And Tuesday has been one of those ‘dramatic downturn’ days.
The trigger? Investors were less than enthused by the company’s third quarter financial performance, which reaffirmed some earlier warnings. For the three months ending June 30th, 2018, the company reported total revenue of $208 million. During the same period last year, revenue was $223 million.
The main driver for the drop in revenues was a decline in home theater speaker sales, which fell $17 million year over year.
While the initial IPO of Sonos was considered successful, those buying near the top after the IPO could be getting a little bit nervous.
Baked-in assumptions about the company’s stability and growth prospects now face serious questions. The drop in home theater speaker revenue indicates that the individual product line may be past the period of maturity.
As soon as the reports were issued, the early morning sell-off ensued. After closing the prior day at above $21 per share, the Sonos stock has fallen to around $17/share in current (Tuesday) trading, while also spending some time around $16.50/share.
At this point, it remains to be seen how the company will react to the decline in the share price. For those that got into the company at the initial IPO, the current price still represents a big increase compared to the $15 entry point. However, this decline continues to show the volatility in the company and underlying stock price.