Sonos Posts Q3 Beat and Raised Guidance; Shares Pop 11%

Sonos, Inc. (SONO) shares jumped almost 11% in Thursday’s pre-market session after the company delivered blowout fiscal third-quarter results and raised its Fiscal 2021 guidance well above analyst expectations.

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Sonos is a sound experience brand that develops and manufactures audio equipment and is best known for its multi-room audio products. The company has a market capitalization of about $4.3 billion. (See Sonos stock charts on TipRanks)

Adjusted earnings of $0.27 per share significantly beat analysts’ expectations of a loss of $0.17 per share. The company reported a loss of $0.11 per share in the prior-year period.

Revenues soared 52% year-over-year to $378.7 million and exceeded consensus estimates of $313.6 million. The increase in revenues reflected strong demand for audio products.

Furthermore, gross margins jumped 300 basis points to 47%, and the adjusted EBITDA margin improved to 12.3% compared to a negative margin of 1.1% in the prior-year quarter.

Sonos Raises Fiscal 2021 Guidance

Based on the robust Q3 results and demand outlook, management raised its guidance for Fiscal 2021. Revenues are forecast to be in the range of $1.695 – 1.71 billion, versus the consensus estimate of $1.66 billion. This implies a growth range of 28% to 29% year-over-year. The company previously expected revenues to range between $1.625 and 1.675 billion.

Moreover, adjusted EBITDA is now expected to grow between 149% and 158% and range between $270 million to $280 million. This compares to the previously guided range of $225 million to $250 million.

Sonos CEO Patrick Spence commented, “Long-term, we remain focused on our key three strategic initiatives – the expansion of our brand, the expansion of our offerings, and driving operational excellence.”

He further added, “We are extremely well positioned for the long-term and expect to deliver significant free cash flow and increased shareholder value over time as we continue on our quest to be the world’s leading sound experience company.”

The stock has picked up a rating from one analyst in the past three months. Morgan Stanley analyst Kathryn Huberty increased the price target from $45 to $47 (35.1% upside potential) and reiterated a Buy rating on the stock.

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