Hot stock to watch: Sonos Inc (NASDAQ: SONO)

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Sonos Inc (NASDAQ: SONO) stock rose over 2% on November 21st, 2019 pre-market session (Source: Google finance) as the company posted better than expected topline results for the fourth quarter of FY 19 due to product introductions and marketing improvements. The company has posted a fiscal fourth-quarter net loss of $29.6 million compared to a loss of $1.7 million, in the year-earlier period. The company had generated more than $97 million in free cash flow in fiscal 2019, ending the year with $339 million in cash. SONO has exited FY19 with over 9 million homes around the world using Sonos.

SONO in the fourth quarter of FY 19 has reported the adjusted loss per share of 28 cents, missing the analysts’ estimates for the adjusted loss per share of 22 cents, according to analysts surveyed by FactSet. The company had reported the adjusted revenue growth of 8 percent to $294.2 million in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $289 million. Gross margin has fallen 40 basis points year-over-year to 42.2%. The adjusted EBITDA loss for the fourth quarter was $3 million compared to a $20 million profit last year. The loss was mainly due to increased sales and marketing to support the launch of Move, and increased R&D headcount to support new hardware and software development.

For fiscal 2020, Sonos expects revenue to be in the range of $1.365 billion to $1.4 billion, the midpoint of which comes in above the $1.375 billion FactSet consensus. The company projects a one-time negative impact to earnings before interest, taxes, depreciation, and amortization (Ebitda) of $30 million in fiscal 2020, which will be related to the tariffs that went into effect at the start of September. The company projects that about half of that impact will come in the first quarter of fiscal 2020. Including the tariff impact, Sonos anticipates the range to be $72 million to $82 million in adjusted Ebitda while the FactSet consensus was for $95 million.

Meanwhile, the company is going to acquire Snips SAS, which is an AI voice platform for connected devices that provides private-by-design voice technology. As per the terms of the agreement, Sonos acquired Snips for approximately $37.5 million, which is subject to purchase price adjustments and holdbacks. The transaction was expected to get closed on November 14, 2019.

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