Sonos, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Sonos, Inc. (NASDAQ:SONO) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 4.4% to hit US$613m. Sonos also reported a statutory profit of US$0.64, which was an impressive 67% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Sonos

Taking into account the latest results, the consensus forecast from Sonos' eight analysts is for revenues of US$1.65b in 2024. This reflects a reasonable 3.6% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with Sonos forecast to report a statutory profit of US$0.23 per share. Before this earnings report, the analysts had been forecasting revenues of US$1.65b and earnings per share (EPS) of US$0.18 in 2024. Although the revenue estimates have not really changed, we can see there's been a great increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The consensus price target rose 15% to US$21.94, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Sonos analyst has a price target of US$25.00 per share, while the most pessimistic values it at US$18.60. This is a very narrow spread of estimates, implying either that Sonos is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. It's pretty clear that there is an expectation that Sonos' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.8% growth on an annualised basis. This is compared to a historical growth rate of 8.2% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.7% annually. So it's pretty clear that, while Sonos' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Sonos' earnings potential next year. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Sonos. Long-term earnings power is much more important than next year's profits. We have forecasts for Sonos going out to 2026, and you can see them free on our platform here.

We also provide an overview of the Sonos Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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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.