When Will Sonos, Inc. (NASDAQ:SONO) Become Profitable?

Sonos, Inc.’s (NASDAQ:SONO): Sonos, Inc., together with its subsidiaries, designs, develops, manufactures, and sells multi-room audio products in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. On 28 September 2019, the US$1.6b market-cap posted a loss of -US$4.8m for its most recent financial year. Many investors are wondering the rate at which SONO will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for SONO’s growth and when analysts expect the company to become profitable.

View our latest analysis for Sonos

Consensus from the 7 Consumer Durables analysts is SONO is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$30m in 2021. SONO is therefore projected to breakeven around a few months from now. In order to meet this breakeven date, I calculated the rate at which SONO must grow year-on-year. It turns out an average annual growth rate of 48% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:SONO Past and Future Earnings, January 14th 2020
NasdaqGS:SONO Past and Future Earnings, January 14th 2020

I’m not going to go through company-specific developments for SONO given that this is a high-level summary, though, take into account that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. SONO has managed its capital judiciously, with debt making up 12% of equity. This means that SONO has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of SONO to cover in one brief article, but the key fundamentals for the company can all be found in one place – SONO’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should look at:

  1. Valuation: What is SONO worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether SONO is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Sonos’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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