Sonos falls as Morgan Stanley downgrades citing 'more cautious' consumer spending
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Sonos (NASDAQ:SONO) shares fell on Wednesday after investment firm Morgan Stanley downgraded the consumer electronics company, noting that consumers are "turning more cautious" about spending.
Analyst Erik Woodring lowered his rating to equal-weight from overweight and cut his price target to $28 from $38, noting that all consumers, even high-end consumers are more cautious, as inflation is at a 40-year high, the stock market has fallen more than 20% year-to-date and consumer confidence is at a 10-year low. 
"Indeed, our latest AlphaWise Consumer Pulse Survey shows that the majority of respondents - regardless of income bracket - expect to reduce spending in the next six months due to inflationary pressures, despite healthy consumer balance sheets, excess savings at the high-end, and growing home prices," Woodring wrote in a note to clients. "In our view, this is no longer a risk that investors can ignore." 
Sonos (SONO) shares fell slightly more than 2% to $19.17 in premarket trading on Wednesday. Sonos shares have lost nearly 35% year-to-date.
In addition, Woodring noted that while the firm is a longer-term bull on Sonos (SONO) due to its product portfolio and "differentiated growth flywheel," it's likely that there will be a slowdown in demand and more moderate consumer spending will happen, impacting its growth.
As such, it is less likely that estimates on Sonos (SONO) will move higher and there will be a higher earnings multiple, "making it harder for the stock to outperform peers."
In addition, the firm cut price targets on several other consumer electronics names, including Apple (AAPL), Logitech (LOGI), GoPro (GPRO), Garmin (GRMN) and Cricut (CRCT), moving them to $185, $53, $8, $115 and $6, respectively.
Last month, it was reported that hedge fund Greenlight Capital had exited its stake in Sonos (SONO), while also changing up other positions in its portfolio.
Analysts have been positive on Sono's stock (SONO). It had an average rating of BUY from Wall Street analysts, while Seeking Alpha authors rate it a slightly lower BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rated SONO a HOLD.