Sonova Holding Ltd. (OTCM:SONVY)

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Sonova took a sizeable hit today of approx 10% after failing to hit certain expectations. In addition they have apparently lost their biggest North American customer Costco.
This investment is left over from my previous broker and being an investor looking for income I cant see any reason why he had me in this investment in the first place.
Looking for some guidance as to whether I should cut bait or maybe hold if there is future potential.

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Asked on May 16, 2023 2:18 pm
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Hey there. First off, sorry for the delayed reply. Mat and I took an extra day there for the long weekend.

I believe the Costco situation was in 2022, and they did decide to part ways in that regard. I do not believe the company sells in Costco stores anymore.

The reason the company took such a dive after earnings was likely because it announced it lost a significant client in the United States which is expected to impact the 2nd half of the year in terms of overall revenue generation. As a result, it looks like it had to tame guidance. The Costco situation and now this is certainly not a good development for the company.

That said, the company is relatively attractive from a value standpoint, and the dividend looks to be well covered. The company consistently puts up strong returns on equity and invested capital.

The loss of a few big customers over the last year would definitely make me a bit uneasy but the reality of it is the market tends to price things like this in quickly.

It is certainly not a stock that income seekers are going to find attractive. So, if you're looking for larger yields a sale would make sense and ultimately that depends on your individual situation. However, if you're looking for some insight as to whether or not the company is sound, I believe it is.

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Posted by Dan Kent
Answered on May 22, 2023 9:33 am