Why Sonos Stock Fell 13% in February

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What happened

Sonos (NASDAQ: SONO) stock dipped 13% in February, according to data from S&P Global Market Intelligence. The home audio company reported its first-quarter results on Feb. 6, and shares fell immediately after the release and moved lower as the month went on.

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SONO data by YCharts

While Sonos did manage to deliver record first-quarter revenue and earnings that topped the market's expectations, it appears that some investors may have fled the stock due to dissatisfaction with the company's second-quarter guidance and news that the company's chief financial officer will be leaving later this year.

So what

Sonos' first-quarter sales grew 6% year over year to come in at $496 million and top the average analyst estimate's call for revenue of $491 million. Sonos did manage to deliver net income of $61.7 million for the period, good for adjusted earnings per share of $0.55 -- up roughly 53% year over year. However, the company also stated in its letter to shareholders that inventory had started to accumulate at the end of the first quarter, setting up some negative trends heading into the current period. Sonos didn't break out specific guidance for the second quarter, but it indicated that the inventory buildup would affect second-quarter performance -- though not so much as to cause the company to rework its full-year target.

Now what

Sonos stock has been volatile as the market attempts to suss out whether the company will be able to continue building its presence in the space over the long term and eke out a successful business in the competitive technology hardware market.

For 2019, the company expects sales to come in between $1.25 billion and $1.275 billion, representing 11% growth year over year at the midpoint of the target. Adjusted EBITDA for the year is expected to climb between 20% and 27%. Management is targeting for long-term sales growth of roughly 10% annually and annual adjusted EBITDA growth of 20%.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.