Sonos Shares Surge On Short-Seller Study

Sonos Shares Surge On Short-Seller Study

over 3 years ago2 mins

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Smart speaker company Sonos has had a very good lockdown, according to one influential investor – and a new research note predicting that its valuation would soar prior to an Apple takeover has turned shares up over 20% already 🤫

What does this mean?

Short-selling specialist Citron Research has a reputation for being acerbic: in December, for example, it predicted shares of exercise bike guruPeloton would backpedal to $5 this year. But its latest company analysis on Monday was more lemonade than lemons.

Since listing on the US stock market two years ago, Sonos shares have halved in value – with the company warning in November that its 2020 earnings would likely take a hit from US tariffs on its Chinese-made electronics 😰

But coronavirus-induced lockdowns appear to have boosted demand for Sonos’s premium smart wireless speakers as consumers improve their homes. According to Citron, Sonos products are attracting much more internet search interest than competitors’, with most of the company’s range currently sold out due to high demand.

Credit card data also suggests big growth in Sonos spending (Source: Citron Research)
Credit card data also suggests big growth in Sonos spending (Source: Citron Research)

Even beyond this bumper quarter, Citron reckons high profit margins, consistently strong growth, and valuable patents second only to Apple’s in consumer electronics (Sonos is suing Google over its Nest speaker tech) leave Sonos’s share price set to double to $30 by the end of 2020 😎

Why should I care?

Citron’s optimism set Sonos’s stock spiking on Monday. But even its predictions of a 100% rise are said to be conservative judging by competitors’ valuations. A 500% increase could be on the cards if Sonos got taken over…

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Recent concerns over product “bricking” also reveal just how “sticky” Sonos’s platform is. Existing customers represent 37% of new purchases, with the average user owning three sleekly designed Sonos products. Remind you of anyone? That’s right: according to Citron, rumors of an eventual Apple acquisition (resembling its 2014 Beats takeover) may be justified – especially now Sonos speakers are already being sold in Apple stores.

Still, Citron isn’t infallible, and it can’t expect the unexpected. Peloton shares, after initially falling this year, have been one of the big beneficiaries of gym closures and enforced staying-in: they’ve risen 75% since the pessimistic December research… 😬

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