Sonos (NASDAQ:SONO) plans to release high-end over-the-ear headphones as early as April which will be priced at more than $400, according to a report from Bloomberg.
The company, best known for its smart speakers, is also reportedly working on smaller in-ear wireless earbuds and a streaming box for TV.
Analysts at Jefferies also believe audio device maker Sonos (NASDAQ:SONO) is developing headphones, citing multiple signals including acquisitions, patent filings and LinkedIn posts.
“On the fourth quarter 2023 earnings call, Sonos (NASDAQ:SONO) announced that they would enter a large multi-billion-dollar product category in the second half of 2024, leading us to believe the new category is headphones,” they wrote in a note to clients.
“We expect Sonos (NASDAQ:SONO) will launch multiple headphone offerings over time.”
The analysts said the potential launch was “music to our ears.”
“We’re excited by a possible launch as it expands the total addressable market [by about $20 billion], allows for cross-sell of multiple headphones into existing households, and the category has a naturally faster upgrade cycle versus existing portfolio,” they wrote.
“We believe headphones present a completely new category for Sonos that has virtually zero cannibalization to other products in the portfolio while also creating an avenue to acquire new households.”
They wrote that their analysis shows that every 1% of headphone penetration Sonos achieves from its existing 15.3 million households at a $400 price point would drive $61 million in revenue, representing 3.7% of its 2023 fiscal year revenue.
“Notably, our scenario analysis ignores the impact the headphones could have on new household acquisitions or multi-purpose households,” the analysts pointed out.
They wrote that competition from Apple Inc (NASDAQ:AAPL), Samsung Electronics (KRX:005930), and Bose was the biggest risk to their thesis.
“While we see opportunity for Sonos to carve out a niche in headphones, we acknowledge that the category is highly competitive with entrenched players who offer broad lineups of headphones,” they wrote.
Sonos shares traded up 3.1% at US$14.47 on Wednesday morning and have gained 13.7% week over week.
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