Sonos stock plunges after weak demand encourage forecast cut

Sonos (NASDAQ: SONO) shares dropped 15% after the leading audio-products manufacturer cut its full-year forecast for adjusted EBITDA and revenue.

Sonos loses to analyst estimates 

Even though the company recorded 19c EPS in the third quarter of the 2022 fiscal year, which was actually way better than the 6c analyst estimate, the $372.8 million in revenue it reported in the same quarter was a lot less than the $424.03 million consensus estimate.

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Sonos claims the softer revenues it recorded in the quarter were because of inflation pressuring consumer sentiment and the strong dollar. As a result, the audio-products maker also cut its FY adjusted EBITDA forecast from $290 and $310 million to $215 and $230 million. FY revenue, on the other hand, is in the range of $1.73 and $1.76 billion, a reduction from the previous outlook of $1.95 to $2 billion.

Financial analysts were expecting the company to record a $302.6 million adjusted EBITDA on $1.98 billion in sales.

Sonos Chief Executive Officer, Patrick Spence, said:

We have seen the macroeconomic backdrop become significantly more challenging for us starting in June as the dollar’s appreciation and high inflation have adversely affected consumer sentiment globally, particularly in the categories in which we play. As a result, revenue missed our expectations for Q3 and we are adjusting our FY22 outlook accordingly.

Sonos extended its timelines of achieving the targets the company previously announced of adjusted EBITDA margins of 15-18%, gross margins of 45-47% and total revenue of $2.5 billion beyond 2024, because of evolving and uncertain macroeconomic backdrops.

Sonos also announced that Brittany Bagley, the company’s Chief Financial Officer, is stepping down from this position to pursue other professional opportunities. The company’s Chief Legal Officer, Eddie Lazurus, was appointed as Sonos’ interim Chief Financial Officer.

Analyst comments 

Adam Tindle, an analyst at Raymond James, wrote in a note:

We previously cited the “wall of worry” that the initial F2H guide created, and this has since come to fruition as consumer behaviour deteriorated in June leading to disappointing results alongside ERP change, and a CFO departure announcement alongside an indefinite pushout of FY24 targets put salt in the wound.