Is Sonos A Buyout Candidate???
Since making post on Hive my relationship with Andrew Left has gotten much better. Really the relationship is one sided, meaning I know him, but he has no idea who I am. The relationship started when I wrote a post about Peloton and that controversy commercial they made in preparation for Christmas.
The commercial was Peloton's 30-second ad depicting an upper middle class woman (appearing physically fit) who receives a Peloton exercise bike as a Christmas gift from her husband. She then journalizes her use of the machine over the next 12 months, hard at first because she is getting up at 5 am to work out at times, but then thanking her husband for the thoughtful gift at the end of the ad. However, social media went H.A.M. on the commercial, but bad press is good press. Then Peloton received more press when Andrew Left, notorious short seller said Peloton’s stock price and was heading to $5 by the end of 2020.
I do think Andrew likes the spotlight and the last post I wrote about Andrew was he was high on Restoration Hardware Holdings based on the thesis that American workers are moving out of cities to the suburbs because of COVID-19 and companies are permanently allowing their employers to from home. At the time, Restoration was trading near XXXX and now the stock price is retesting its all-time high at $260.
A week ago, Andrew made headlines when he said Sonos’s stock price was headed to $30, which would represent a 100% return.
Citron cited Sonos’s strength in the stay-at-home environment created by the coronavirus pandemic.
“Sitting at the intersection of stay at home, streaming wars, and the connected home, Sonos has quickly emerged as the leader of sound in the connected home,” Citron said in a commentary.
Sonos is the Apple of home audio, Citron said. “From when you open the box, the similarities between Sonos and Apple are uncanny.”
And “Sonos is not a commodity business. Saying that Sonos just sells speakers shows a lack of understanding of the software platform behind the product,” the report stated.
“With attention to design and quality, Sonos has created a sticky platform. Existing households represent 37% of new-product registrations, with the average home carrying 2.9 Sonos products.”
However, for the companies second quarter, the company saw a 17% year-over-year decline in revenue. Which jeopardizes 13 consecutive fiscal years of positive revenue growth. In addition, a week ago, Sonos announced it was laying off 12% of its workforce. In addition, the company was closing some of its offices and showroom in Manhattan’s Soho neighborhood. And to help make ends meet, the Sonos board approved a 20% reduction in Patrick Spence's salary for the second half of the calendar year and a 20% base-salary cut for other executive officers for from July 1 to Sept. 30.
Nevertheless, Sonos products are in more than 10 million homes and being listening hours are up 32% in March over the prior year, and accelerated to a 48% in April. So is Sonos a buyout candidate? Is Andrew throwing hints Apples way to acquire the company? According to theflyonthewall.com there was a single buyer who bought close to 10,000 15/20/25 butterfly spread call option that expires in August.
NOTE:
In this case, a butterfly spread is a three-part strategy that is created by buying one call at a lower strike price, selling two calls with a higher strike price and buying one call with an even higher strike price.
Sonos currently trades at $14, but if the price can rise to $20 before August 21st, the buyer stands to make 4X what he is risking. But I'm not seeing it, as price needs to get above two pivots highs before getting to $20.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
