Sonos stock fell more than 20% after the company announced that its revenue had declined 6.6% from the previous year. Following an underwhelming August IPO, Sonos seemed to get back on track with a stock price around $20 (up from an initial $15).
But, Monday’s earnings report shows that growth is slowing
Unfortunately for Sonos, the $208m in revenue that it reported for Q3 actually exceeded analysts’ expectations — suggesting that investors may have had unrealistic expectations for the company’s performance.
Even worse, some fear that the smart-speaker company could be the next victim of the consumer hardware curse.
Trying not to go the way of the GoPro
Other tech hardware companies have also struggled to sustain stock prices after inflated IPOs. GoPro shares soared to $86.97 and Fitbit hit $47.60 before they fell back to less than $7 and $6 today due to market saturation.
Like GoPro and Fitbit products, Sonos’ expensive high-end speakers have a limited addressable market. But to make matters even worse for Sonos, the smart speaker market is also becoming increasingly crowded with tech titans such as Apple, Google, and Amazon.
So far, Sonos has kept hungry rivals at bay by digging itself a patent moat. But while the moat may work in the short run, Sonos will eventually need more than patents to protect itself from trillion-dollar troublemakers like Apple and Amazon.