Sonos Inventory Woes Hurts Shares But Fails to Faze Analysts

(Bloomberg) -- Sonos Inc. shares tumbled in pre-market trading on Thursday after ending the first quarter with higher inventory levels, even as results topped estimates.

Shares fell as much as 7 percent before the bell, extending a drop of more than 6 percent in Wednesday’s session before the results were released.

Sonos Inventory Woes Hurts Shares But Fails to Faze Analysts

Analysts said the inventory issue was disappointing, although they remained broadly positive on the speaker company’s prospects.

Here’s what analysts are saying:

Raymond James, Adam Tindle

Understands “investor anxiety” on the channel inventory issue, “but let’s take a step back. If we penalize the company for the entire amount of inventory reduction, revenue growth during the last eight quarters (during major pushes by Amazon, Google, etc.) was still north of ~12 percent on average.”

“This highlights the big picture that the company is 1) still growing double digits organically despite the competitive threats it has faced (which is a better bear case than quarterly inventory volatility); and 2) is now moving into a cycle that should take it into greenfield markets outside of traditional home audio.”

Maintains outperform rating, but price target goes to $19 from $21.

Morgan Stanley, Yuuji Anderson

The inventory issue “is disappointing but better January sell through, underappreciated opportunity in Amp and new passive speakers.”

The “better than expected operating leverage make us buyers on the pullback.”

Affirms overweight rating and $15 price target, writing that the “current valuation doesn’t reflect revenue diversification story.”

Jefferies, Brent Thill

“We were encouraged by solid execution in Q1 and 10-12% top line growth guide for ’19. However, worries linger with lack of clarity on new product launches, decel in ’19 rev growth (down from 15% in ’18), CFO departure, and a slowdown in velocity.”

“Without a more mass market product at a competitive price, we remain a Hold, $12PT due to the unpredictability of the hardware business.”

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