10 Best Consumer Electronics Stocks to Buy

07. Sonos, Inc. (NASDAQ:SONO)

Number of Hedge Fund Holders: 20

Sonos, Inc. (NASDAQ:SONO) is a renowned provider of high-quality audio products and services, designing and manufacturing wireless, portable, and home theater speakers, along with various components and accessories. The company has a strong global presence, distributing its products through approximately 10,000 third-party retail stores, custom home audio installers, e-commerce retailers, and its own website. Originally known as Rincon Audio, Inc., the company rebranded as Sonos, Inc. in 2004 and is headquartered in Santa Barbara, California. Sonos, Inc. (NASDAQ:SONO) remains a compelling option for investors, despite some challenges. In Q3 2024, the company delivered solid financial results, reporting revenues of $397 million, marking a 6% year-over-year increase. This growth was driven by the successful launch of Sonos’ first over-the-ear headphones, Ace, which entered the $5 billion premium headphone market. Despite a year-to-date revenue decline of 6.5%, Sonos’ gross margin rose to 48.3%, an improvement of 230 basis points from the previous year, indicating effective inventory management and cost control measures.

The company’s financial health is further underscored by its strong free cash flow generation. Sonos, Inc. (NASDAQ:SONO) generated $40.3 million in free cash flow during Q3, bringing the year-to-date total to $188 million, a significant increase from the $38 million in the prior year. This improvement was achieved through better inventory management and optimized supplier payment terms. The company ended the quarter with $277 million in net cash, providing a robust liquidity position to weather near-term challenges.

Despite setbacks related to the rollout of a new app, which delayed the release of two major products, Sonos, Inc. (NASDAQ:SONO) is committed to enhancing its customer experience. CEO Patrick Spence acknowledged these issues and outlined a clear strategy to address them, including fixing key bugs and improving the app’s performance through regular updates. The company has allocated $20 million to $30 million toward resolving these issues, which should strengthen its long-term position.

Investors should also note that Sonos returned $52.5 million to shareholders through stock repurchases in Q3, representing 2.6% of common shares outstanding. With $71 million remaining under its current share repurchase program, Sonos demonstrates its commitment to delivering shareholder value. In summary, Sonos, Inc. (NASDAQ:SONO) strong fundamentals, coupled with its strategic approach to navigating short-term headwinds, make it an attractive stock for investors seeking exposure to the premium consumer electronics market.