I haven’t been a big fan of our new Sonos Audio System. But SONO stock has become a big winner – and could become an even bigger one.
When evaluating stocks to buy, investors oftentimes need to remember the old trading saying, “The stock is not the company, and the company is not the stock.” That’s precisely the case with Sonos (SONO): I love SONO stock, but hate my Sonos audio system.
This year for Father’s Day my wife bought me a Sonos Move, which is a wireless speaker that is touted as having brilliant sound with voice and app control. I was thrilled with this gift as our previous wireless speaker was good, but not great.
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Unfortunately, while my wife’s gift was very generous, for months we have not been thrilled by the Sonos product—the sound is okay, but the voice and app control features are horrible. I think our Sonos ignores our requests (“play Fleetwood Mac!”) more frequently than our pre-teen daughter (“no, you may not post videos to YouTube!”) does, which is really a high bar to clear. Our experience with the Sonos Move has been so bad that we wish we hadn’t thrown away our five-year-old wireless speaker device.
My SONO Stock Trade
But while I hate my Sonos product, I do love the prospect of SONO stock trading higher in the months to come following a blowout earnings report and big stock move higher. Here is a small sample of a trade alert I sent to my Cabot Options Trader/Cabot Options Trader Pro subscribers explaining why we were adding the stock to the portfolio:
Sonos (SONO) popped on my radar last week after the company reported a very strong earnings report. This earnings beat sent the stock from 17 to 22 on Thursday, before pulling back to 21 today.
Option activity since that earnings move has been very bullish, targeting nearly every upside strike, in every expiration cycle, including this trade made this morning:
Buyer of 1,000 Sonos (SONO) January 30 Calls (exp. 2022) for $3.40 – Stock at 21.5
While I think the market looks just okay right now, I do like the way SONO has traded following earnings, as well as the fairly inexpensive options, and am going to take a shot that SONO could be a new earnings season star.
The risks I see in this trade are general market risk, as well as the possibility that the SONO earnings pop could fail. Also, much like Cloudflare (NET), and countless other recent earnings season winners, it is possible that SONO could chop around aimlessly in the days/weeks ahead if the market doesn’t get going.
Fortunately for Cabot Options Trader subscribers, SONO stock took off on Monday, breaking above its earnings high from two weeks ago. And we took advantage of this stock move to lock in a profit of 22% on half of our position, with the plan that we will go for the home run on the balance.
This strategy of selling half and then going for a grand slam on the balance is the strategy that allowed Cabot Options Traders to lock in profits of 1,100% on our Peloton (PTON) calls, and of more than 200% in a JD.com (JD) position – both in the last six weeks—in addition to five currently open positions at profits well north of 100%.
And while I anticipate returning our Sonos Move audio system in the coming days, based on the stock strength and overwhelmingly bullish option activity, I’m hoping to ride SONO stock to even more new highs in 2021.
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Jacob Mintz is a professional options trader and Chief Analyst of Cabot Options Trader. He uses calls, puts and covered calls to guide investors to quick profits while always controlling risk. Beginners and experts alike can gain from following Jacob’s advice.Learn More