The pandemic was a mixed blessing for Sonos, but at least the global health crisis helped convince investors that the premium speaker maker has staying power.
Between its initial public offering in mid-2018 and its fiscal year-end report on November 19, 2020, Sonos shares barely averaged a modest multiple of a time of the company’s future sales. That was in keeping with the valuation purgatory that Wall Street generally reserves for companies in the highly cyclical consumer technology hardware space. Sonos also had the added burden of competing directly with the planet’s biggest tech companies, two of which were content to sell smart speakers at cut prices to aggressively expand the market for their voice assistants.
Sonos still competes with Amazon and Google in that category, and Apple Inc. joined the fray late last year with the unusually inexpensive HomePod mini, which retails for $ 99. But Sonos still managed to increase sales in the second half of 2020. That was helped by better distribution of the company’s products following the retail disruption at the start of the pandemic, as well as by homebound workers who ultimately decided to invest in quality sound systems. It has also managed to keep its median sales price well above $ 200. Investors have started to tune in; Sonos’ stock price has more than doubled since fiscal fourth quarter results on November 19, and its valuation multiple has nearly tripled to about 2.9 times future sales.
It was a good time for the company to turn things around. Sonos announced a new speaker Tuesday afternoon: a $ 169 device called the Roam that targets the ultra-portable Bluetooth speaker segment. He also used a virtual analyst meeting to set out his long-term financial goals. Sonos now expects to end its fiscal 2024 year with revenue of around $ 2.25 billion, which implies an average sales growth of around 13% annually. The company has averaged annual sales growth of just under 10% for the past five years.
Sonos isn’t hanging those expectations entirely on the Roam, but the new speaker helps expand the company’s market to a new level without sacrificing its premium image. The Bluetooth speaker segment is a broad category with prices averaging around $ 98, according to estimates from Futuresource Consulting. But the Roam can still use a Wi-Fi connection while at home, along with voice assistants from Amazon and Google available on other Sonos speakers. And the price disparity is not as wide as it seems. Futuresource estimates that Samsung‘s
JBL, Sony, and Bose accounted for about 53% of Bluetooth speaker sales last year, and they all have offerings priced similar to or higher than Roam.
Sonos will likely continue to add new products and services to expand its reach outside the home. The company confirmed Tuesday that it is working with Audi on a sound system for an upcoming SUV called the Q4 e-tron. Having proven that it can compete well with the giants at home, the time is right for Sonos to take their show on the road.
Write to Dan Gallagher at [email protected]
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It was featured in the March 11, 2021 print edition as ‘Speaker Maker Sonos Needed to Crank It Up’.