Introduction
Sonos (NASDAQ:SONO) has bounced back in recent months after a string of excellent quarterly results that show improving top and bottom-line performance. Shares are now trading at $14, up 5% and 40% since the publication of our most recent and first articles on the company, respectively.
We believe that the market has been excessively pessimistic about competitive and product commoditization risks, which has led to multiple large downswings in share price since the company's IPO last August. In this article, we will explain why we consider Sonos an attractive long-term investment opportunity and outline risks that investors should be aware of.
(Lifewire)
Business Overview
Sonos is an audio company that sells wireless speakers, home theater speakers, and various accessories. Sonos competes in the high-end of the audio market alongside competitors including Bose and Bang & Olufsen (OTC:BGOUY).
The Sonos app enables customers to play music from their providers of choice (e.g., Apple Music, Spotify, Pandora, etc.) in any room of their home. This software also allows simultaneous playback from devices across multiple speakers, providing a multi-room audio experience that has become the cornerstone of Sonos's brand image and product offering.
This multi-room audio experience makes repeat purchases common since customers can add more Sonos products to different parts of their home in order to provide a broader and inter-connected sound experience. Existing households accounted for 37% of new product registrations in 2019, which is indicative of this phenomenon as well as customer satisfaction and brand loyalty.
Financial overview (in millions USD)
Shares Outstanding (in millions) | 103.78 |
Share Price | 13.88 |
Market cap | 1,440.5 |
Debt | 24.84 |
Cash | 338.64 |
Enterprise Value | 1,126.7 |
(Source: CapitalIQ)
With a market capitalization of $1.44 billion and a net cash position of $314 million, current enterprise value stands at $1.13 billion. Management has avoided taking on lots of
