Pump Up The Volume: Morgan Stanley Thinks Sonos Could Go Higher

Investors were pumping up the volume on speaker maker Sonos, Inc. SONO following an upgrade from Morgan Stanley, which likes its new product plans and distribution deal with IKEA.

The Analyst

Morgan Stanley analyst Yuuji Anderson upgraded Sonos from Equal-Weight to Overweight, while lowering the price target to $15 from $20.

The Thesis

Investors may be overlooking the potential for the high-end speaker maker, lumping it in with other small-cap consumer electronics makers, which have struggled.

But the upside for Sonos has a clearer tone, Anderson wrote in a note to investors.

Sonos, which went public last August, will begin shipping speaker modules for IKEA products in the September quarter, it has a new product called The Amp, and its Beam soundbar has been doing well – all upsides for the company, Anderson said.

“We have greater confidence in Sonos' roadmap: new product introductions over the next twelve months meaningfully expand categories (custom home solutions, furniture, outdoor) and distribution opportunities (IKEA) while likely declines in older speaker products are being more than offset by strong receptivity to the Beam,” Anderson wrote in the note. “We continue to gain confidence in new products and see significant upside potential to the stock.”

Price Action

Shares of Sonos were up 1.5 percent to $11.15 in Monday's trading session.

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Photo courtesy of Sonos.