Today is shaping up negative for Sonos, Inc. (NASDAQ:SONO) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the seven analysts covering Sonos provided consensus estimates of US$1.7b revenue in 2023, which would reflect a perceptible 4.4% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to crater 36% to US$0.62 in the same period. Previously, the analysts had been modelling revenues of US$2.1b and earnings per share (EPS) of US$1.43 in 2023. Indeed, we can see that the analysts are a lot more bearish about Sonos' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 24% to US$22.83. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Sonos at US$29.00 per share, while the most bearish prices it at US$17.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.6% by the end of 2023. This indicates a significant reduction from annual growth of 13% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sonos is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Sonos' revenues are expected to grow slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Sonos.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Sonos analysts - going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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