Sonos CEO: Market is underestimating the smart speaker war

Sonos (SONO) is doing its part to send its stock much higher this year. Now the market has to do its part and respond accordingly.

Shares of the smart speaker maker surged more than 10% in early trading on Thursday following a better-than-expected fiscal first quarter. The results were solid across the board. Sales increased 13.1% year over year to a record $562.1 million. Powered by the new Sonos One SL, Sonos Move, Sonos Amp and Sonos Port, gross profit margins rose 120 basis points. Excluding the impact of the Trump administration’s tariffs on Chinese goods, profit margins expanded 460 basis points.

Full-year sales are seen up 8% to 11%. Including tariffs, Sonos’s EBITDA (operating profits) is expected in a range of $72 million to $82 million. Excluding the tariffs, EBITDA would be in the range of $102 million to $112 million.

Sonos reiterated its long-term sales growth target of 10% and EBITDA growth estimate of 20%-plus.

All in all, not too shabby for Sonos in such a competitive market dominated by far cheaper devices from Google and Amazon.

“What we saw in the quarter was that we were gaining market share,” Sonos CEO Patrick Spence said on Yahoo Finance’s “The First Trade.” “I do think the brand is underestimated as is the impact of our existing customers always coming back and buying more.”

Perhaps also underestimated is Sonos’s willingness to fight to protect what is a treasure trove of patents.

Sonos filed two complaints against Google (GOOGL) in the quarter, alleging the tech beast is ripping off several of Sonos’s technologies. Spence said Sonos was forced to take the action against Google after talks over compensation dried up.

“We don’t believe they are recognizing the value that is there. In trying to work it out in terms of talks, we felt this was the step we had to take in order to make sure we are properly getting the value we deserve,” Spence said.

And he isn’t ruling out similar action against others that aren’t fairly compensating Sonos for its technologies.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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