Few sectors on Wall Street are as out of favor these days as consumer electronics stocks. The steep declines from recent initial public offerings for Arlo Technologies (ARLO) and Sonos (SONO) are notable examples of the trend.
IBD’s Consumer Products-Electronic industry group ranks No. 189 out of 197 groups. Six months ago, the group ranked No. 142.
Premium stereo speaker maker Sonos went public on Aug. 2 at 15 a share. On Monday, it rose 2.8% to 11.
Arlo and Sonos have followed the downward path of other high-profile consumer electronics stocks in recent years. When they went public last summer, skeptics compared the two to action-camera maker GoPro (GPRO) and fitness band maker Fitbit (FIT). GoPro and Fitbit started strong after their initial public offerings, but tanked as their sales faded.
Sonos Focusing On Long-Term Strategy
Sonos stock tumbled after the Santa Barbara, Calif.-based company delivered its fiscal first-quarter report on Feb. 6. It beat Wall Street’s targets for the December quarter, but guided to lower-than-expected sales for the March quarter. It also announced that Chief Financial Officer Mike Giannetto is retiring later this year after more than seven years with Sonos.
Sonos earned 55 cents a share, up 53% year over year, on sales of $496 million, up 6%, in the holiday quarter. Analysts expected it to earn 40 cents a share on sales of $491 million.
Mike Groeninger, Sonos vice president of corporate finance, told Investor’s Business Daily that investors overlooked solid December-quarter results.
“This was our most profitable quarter ever,” he said. “It also was our highest revenue quarter ever, and we’ve been in business for 16 years.”
Sonos management is focused on a strategy of sustainable profitable growth, Groeninger said. It plans to increase sales 10%-plus annually over the long term while growing adjusted earnings by 20%.
Arlo Edges Q4 Views, But Guidance Raises Red Flags
Arlo stock cratered 49% on Feb. 5 after the San Jose, Calif.-based company issued its fourth-quarter results and guidance.
It lost an adjusted 33 cents a share in the December quarter on sales of $129.3 million. Wall Street was modeling Arlo to lose 35 cents a share on sales of $128.6 million.
Arlo said sales slowed significantly late in 2018, leading to a buildup of inventory. It guided to first-quarter revenue of $48 million to $52 million, vs. consensus expectations for $126.5 million. It expects to lose an adjusted 51 to 55 cents a share, vs. views for a loss of 24 cents.
Garmin, iRobot Outperform Other Consumer Electronics Stocks
Not all consumer electronics stocks are hurting, though.
Garmin (GRMN) — a maker of outdoor, fitness and navigation devices — hit an 11-year high of 70.77 on Monday. It hit a buy point of 68.81 on Jan. 25. The stock broke out of a 16-week double-bottom base. Garmin will report fourth-quarter earnings on Feb. 20.
Home robot maker iRobot (IRBT) surged after its upbeat fourth-quarter earnings report on Feb. 6. Shares of iRobot have formed a cup base with a buy point of 118.85. IRobot stock rose 2% to 106.25 on Monday.
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