Sonos Stock Surges As Analysts Warn Investor Not To Buy Into the Sound Company
Despite their plans to enter the TV OS market shares in US audio Company Sonos surged 14.8% early this week mostly in response to news that Standard & Poor’s is adding the stock to its S&P 600 Small Cap Index.
They have since fallen back and were down over 5% overnight.
News of being added to an index can spark pre-emptive buying from investors looking to capitalize on impending institutional buying.
Any fund company that maintains an S&P 600-based fund must now buy shares of Sonos to reflect the index they’re trying to mirror.
Such a wave of buying, of course, can buoy a stock’s price that may not have otherwise been lifted due to performance of the business.
Sonos who are cranking up their direct sell market, has seen their stock fall over 9% during the last two quarters with the recent surge bolstering their poor six-month performance.
Nasdaq claimed that While an inclusion in an index is a victory of sorts for a young company in that it forces institutional interest in that organization, it’s not exactly a reason to buy it. And it’s certainly not a reason to buy it now.
They claim that Sonos’ future isn’t any brighter simply because it’s becoming part of the S&P 600.
They went on to claim that “If anything, the shares may be ripe for a little weakness headed into Wednesday’s transition, as too many speculators piled into it today on hopes that this is indeed the beginning of newfound bullishness. It isn’t.”