Sonos stock plunges following earnings beat, guidance cut on softening demand

The Yahoo Finance Live team discusses the decline of Sonos shares on earnings amidst a slowdown in consumer demand and how investors are reacting.

Video Transcript

JULIE HYMAN: We're also watching Sonos' shares this morning. They are plunging after the company saw revenue sink. By 24% in the second quarter. They cut the full year earnings guidance as well, as consumer demand is softening for its speakers. And this is one of those sort of pandemic payback-- payback-- paybacks that maybe was a little like delayed perhaps. Everybody beefing up their auditory experiences at home during the pandemic, and now seeing a waning in demand.

BRAD SMITH: Yeah, interesting. You never want to hear an earnings call start out with this was a quarter of-- this quarter was a tale of two cities. Of course, if you're Charles Dickens, or at least the heirs of such, you would love to hear that because it gives a nod to, you know, "The Tale of Two Cities."

JULIE HYMAN: "Tale of Two Cities."

BRAD SMITH: The best of times, the worst of times, though, is what Sonos is essentially saying here. And here's what the best of times was. They executed a successful launch. I'm talking about the Era 100 and Era 300, those products, getting those into markets. Next generation of the best-selling Sonos 1 here.

However, here's where you get into the worst of times, perhaps. Even as they made all of this progress, they said on the earnings call, "the near term macroeconomic pressures we have flagged throughout fiscal 2023, they intensified in Q2 and diminished our second half and full year expectations." So they knew this would be a challenging year. And they had to downwardly revise their second half expectations. And investors reacting accordingly.

JULIE HYMAN: Yeah, one interesting comment for me from Brent Thill over at Jefferies, who said that the macro challenges are definitely an issue here. But it's an issue not just for Sonos, for its competitors as well. And he says Sonos does not appear to be giving up market share in this environment, which I guess is a little bit of a silver lining.

BRAD SMITH: I mean, electronics have been challenged, right? And look no further than directly at a pure-play electronics speaker player like a Sonos right now to see some of that challenge really playing out in this particular period of time.