Why Sonos Stock Jumped Monday

Daniel Sparks, The Motley Fool
Updated

What happened

Shares of wireless speaker system company Sonos (NASDAQ: SONO) jumped on Monday, rising as much as 13.4%. As of 11:11 a.m. EDT, the stock was up 11.6%.

The stock's gain follows an analyst upgrade Monday morning. A Raymond James analyst upgraded the stock from a market perform rating to strong buy.

A chart showing a stock price moving higher
A chart showing a stock price moving higher

Image source: Getty Images.

So what

Raymond James analyst Adam Tindle set a 12-month price target of $19 for Sonos stock. Even after the stock's jump today, this implies over 40% upside.

"Consider, Sonos currently trades in the same zip code as niche product company GoPro, and unprofitable company Arlo, yet Sonos has a two year revenue [compound annual growth rate] that is essentially double these companies and has done so while improving [EBITDA] margin and generating positive cash flow," the analyst wrote (via MarketWatch).

Earlier this month, Sonos reported fiscal third-quarter revenue of $260 million, up 25% year over year. The company's adjusted EBITDA was $7 million, up from a loss of $2 million in the same quarter last year.

Now what

The company is certainly seeing some notable business momentum -- enough for management to boost its full-year fiscal 2019 outlook when it reported its fiscal third-quarter results. Management said it expects revenue during the period to be between $1.250 billion and $1.260 billion, up from a previous forecast for revenue between $1.250 billion and $1.275 billion. In addition, the company said it now expects its gross margin to exceed its previous gross margin guidance for 40% to 41% by about 100 basis points.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com