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A big win for Sonos (SONO) on the patent front against Google could unlock more stock price gains than the initial 12% pop seen in pre-market trading on Monday.
A U.S. International Trade Commission judge ruled on Friday that Google had infringed Sonos’ patents. The lawsuit began in January 2020, with Sonos claiming that Google had infringed five of its smart speaker patents by putting its technology into Google products. Sonos wanted a ban on the sale of several Google products such as Nest home speakers, Pixel smartphones and Chromecasts.
“We don’t think they recognize the value that is there. In trying to sort it out in terms of talks, we felt that was the step we needed to take in order to make sure we were getting the value we deserved properly, ”Sonos CEO Patrick Spence told Yahoo Finance Live from the start of the fight against Google.
While this is a great victory for Sonos, a final decision is not expected from the International Trade Commission until mid-December.
By then, the stock could be much higher, analysts say, as the ruling validates Sonos’ vast patent portfolio, which has been touted as a key asset by management since the company went public in 2018. .
“Favorable winds at the margins”
The victory paves the way for Sonos to secure potentially lucrative licensing deals from tech companies that could infringe its patents.
“We note that Sonos has a portfolio of over 2,149 utility and design patents, making it one of the most valuable patent portfolios in consumer technology. We believe Google is likely one of the many companies that infringe Sonos’ patents and suspect their victory against Google will set a precedent for other violators. Today, less than 5% of Sonos’ revenue comes from licensing, but we believe that may grow to a larger share over time as violators make deals with Sonos. a greater mix of overall revenue, ”said Brent Thill, Jefferies technical analyst.
Thill upgraded Sonos shares to Buy with a price target of $ 50 following Google’s move. Thill also cited a strong fiscal third quarter of product demand for Sonos. The company announced last week that fiscal third quarter sales jumped 52% from a year ago. Operating profits reached $ 46.7 million from a loss of $ 2.7 million a year earlier.
“Following ITC’s validation of the strength of SONO’s patent portfolio, we increasingly view their patent portfolio as a competitive advantage, giving SONO an edge over its competitors in the audio market. We believe that their intellectual property will allow them to continue to innovate more than others. in the industry, increasing speed and market share over time, ”added Thill.
Brian Sozzi is an editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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