Sonos stock price forecast for Q3 after Morgan Stanley issues upbeat outlook

On Monday, Sonos Inc. (NASDAQ:SONO) stock spiked 7.54% after Morgan Stanley analysts issued an upbeat update following its lawsuit win against Alphabet Inc.’s (NASDAQ:GOOG) Google. Analyst Katy Huberty said the patent win activated its bull-case price target of $66.00, implying an upside potential of more than 65%.

In a note to investors, Huberty wrote:

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While there is still a multi-month process ahead to finalize the ruling (scheduled for December 13th) and go through any potential appeals, Friday’s win is an important milestone because it confirms the validity of Sonos’ patents and brings Sonos one step closer to potentially better monetizing its industry-leading IP.

The company posted better than expected non-GAAP and GAAP Q2 earnings per share, while revenue soared nearly 52%, beating consensus Street estimates.

From a valuation perspective, Sonos shares trade at a compelling P/E ratio of 24.61, making the stock attractive to value investors. However, analysts expect earnings to fall by a whopping 298% this year, resulting in a forward P/E ratio of 34.18, which is still fair for a growth stock.

The forecast 5-year annual EPS growth rate of about 26.60% implies a PEG ratio of 0.93. Therefore, high-growth investors could find it attractive, following its massive patent lawsuit win against Google.

As such, although Sonos shares are up more than 76% this year, it may not be too late to buy the stock.

Technical overview: SONO stock price predictions for August 2021

Technically, Sonos shares seem to have spiked to overbought conditions of the 14-day RSI in the intraday chart. However, the stock is yet to retest this year’s highs of about $44.72, reached in April. Therefore, there is more room to run despite Monday’s sharp spike.

Investors can target extended gains at approximately $43.79 or higher at $46.53, while the support levels are $38.92 and $36.26. 

SONO shares traded at $41.04 as of this writing.

Bottom line: why buy Sonos shares now?

In summary, although Sonos shares are up more than 76% this year and over 183% in the last 12 months, the stock still trades nearly 7% off this year’s highs. 

Therefore, its win against Google coupled with impressive Q2 results last week could propel the stock price higher in the coming months.

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