We recently compiled a list of the 10 Best Consumer Electronics Stocks to Buy. In this article, we are going to take a look at where Sonos, Inc. (NASDAQ:SONO) stands against the other consumer electronic stocks.
The global consumer electronics market has been experiencing significant growth, driven by rapid technological advancements and evolving consumer lifestyles. In 2024, the market reached an impressive valuation of $755 billion, with projections indicating it could soar to $1.15 trillion by 2031 (as per estimates by Research and Markets). This upward trajectory can largely be attributed to the increasing demand for innovative electronic devices that simplify everyday life and enhance overall convenience. As technology continues to evolve, so too does the consumer electronics industry, which has become an integral part of modern life. Consumer electronics have revolutionized how people live, work, and connect. From smartphones and tablets to smartwatches and connected home devices, these products have become essential to daily routines. They make everyday tasks easier, more efficient, and more enjoyable. Whether it’s remote working, entertainment, or staying connected with loved ones, consumer electronics play a pivotal role in these activities. The steady stream of technological innovation has been a driving force behind the industry’s continued growth, as consumers seek out new devices that integrate seamlessly into their lives.
Consumer electronics devices, which are designed for communication, entertainment, and information purposes, play a crucial role in the tech landscape. Continuous innovation and the release of new, interconnected devices ensure the industry’s competitiveness, with companies constantly striving to capture consumer interest. Despite global economic challenges, the consumer electronics market remains resilient, driven by advancements in areas like AI and smart devices. Wearables, such as smartwatches, alongside newer technologies like AR glasses and VR headsets, are gaining popularity. For example, smartphone shipments reached around 1.2 billion units globally in 2023, cementing the category’s status as the most profitable segment. The market is projected to grow further in the coming years. According to industry reports, revenue could reach $1.13 trillion by 2025, recording a steady annual growth rate of 3%. Additionally, sustainability and recycling trends have become increasingly important, with companies benefiting from recycling materials to address challenges like the global chip shortage. The global electronics recycling market is expected to exceed $57 billion by 2025, further underscoring the industry’s forward-thinking approach to innovation and sustainability.
The business environment is rapidly evolving, and by 2035, what is considered business-as-usual today will likely be vastly different. Stricter regulations and heightened market expectations are expected to result in increased costs related to raw material extraction, logistics, CO2 emissions pricing, and end-of-life expenses. According to a PWC report, the electronics industry could face a 15% increase in operational costs by 2035, compared to a 2023 baseline. This is due to rising landfill fees, longer transportation distances, fluctuating raw material prices, and the depletion of critical resources like copper, cobalt, lithium, and gold. To mitigate these rising costs, businesses can adopt circular business models that lead to lower operational expenses through CO2 savings and efficiency gains. Proactively transitioning to circular models offers a significant cost advantage over passively complying with regulations and sticking to traditional linear models. PWC’s projections reveal that circular business models could lead to cost savings of around 12% and CO2 reductions of at least 10% by 2035 compared to a business-as-usual approach.
North America, particularly the United States, is at the forefront of the consumer electronics market, leading globally in terms of adoption and demand. The region is expected to maintain this leadership position due to its swift embrace of cutting-edge technologies. In the U.S., the fast-paced lifestyle increasingly revolves around digital solutions, with automation becoming a key priority. The American market continues to thrive on its demand for new and innovative devices that can streamline everyday tasks and improve productivity. With the integration of advanced technologies and ongoing innovation, North America remains a critical region for the growth of the consumer electronics industry. At the same time, the rise of smart home technologies has opened up new opportunities for growth in the consumer electronics market. Devices like voice assistants and internet-connected home appliances are becoming increasingly popular, driving demand for products that make everyday life more convenient. The integration of consumer electronics with these technologies is shaping the future of home automation. Companies with advanced voice recognition technology are playing a significant role in the smart home revolution. Collaborative partnerships between firms and AI specialists are further enhancing the potential of these technologies, pointing to a future where smart homes become the norm.
China has also emerged as a major force in the global consumer electronics market, contributing significantly to the supply chain. As a leading producer of electronic components and raw materials, China plays a crucial role in meeting the global demand for consumer electronics. The Chinese market is witnessing a surge in the adoption of devices with voice assistance, Bluetooth, and Wi-Fi connectivity, making lives more convenient. The country’s commitment to technological innovation and the growing preference for smart devices are fueling its market growth. With these advancements, China’s consumer electronics market is projected to continue expanding at an impressive rate over the next decade. In Europe, Germany and the United Kingdom stand out as key markets with immense potential. These countries have seen high adoption rates of consumer electronics such as smartphones, televisions, personal computers, and cameras. European companies are heavily investing in research and development, and many are forming collaborations aimed at driving innovation in the industry. This focus on innovation and the growing demand for high-quality consumer electronics make Europe an exciting region for market growth.
As the global consumer electronics industry continues to expand, it presents compelling opportunities for investors. In this article, we’ll explore the 10 best consumer electronics stocks to buy, offering valuable insights into the companies leading the way in this dynamic and fast-evolving sector.
Our Methodology
For this article we screened for consumer electronics companies using the Finviz stock screener and sifted through online rankings. We compiled a preliminary list of 15 stocks and then scanned Insider Monkey’s database of 912 hedge funds and to pick the 10 stocks with the highest number of hedge fund investors as of the end of the second quarter of 2024. The list is arranged in ascending order of the number of hedge fund investors in each firm.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close up view of an innovative wireless speaker aimed to revolutionize the audio industry.
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.
Overall SONO ranks 7th on our list of the best consumer electronics stocks to buy. While we acknowledge the potential of SONO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SONO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
