Cramer Compares Sonos IPO To Fitbit: 'Way Too Risky'

Fitness tracker and smart watch maker Fitbit Inc FIT saw its stock initially move higher after its 2015 initial public offering, but has since fallen out of favor with investors — and the same may happen with newly public smart speaker maker Sonos Inc SONO, according to CNBC's Jim Cramer.

What He Said

The bullish case for Fitbit's stock was based on the belief that a large and loyal user base would continuously buy newer and more expensive fitness trackers and watches over time, Cramer said during his daily "Mad Money" show Wednesday. This thesis has not played out, as many Fitbit users made it clear they don't need to upgrade their devices as often as the Street expected, Cramer said. As a result, the stock has been a "total, unmitigated disaster," falling from nearly $50 per share to near $5 per share, the CNBC host said. 

Why It's Important

Thirty-seven percent of all new Sonos product registrations in 2017 came from existing users, Cramer said. While this is evidence of a satisfied customer base, he questioned how many speakers even the most loyal of customers can fit in their home. Investors need to keep in mind that smart speakers are likely to be replaced twice every decade at most, he said. 

What's Next

Cramer admitted to getting "burned" on Fitbit's stock amid the hype, and said it's a mistake he won't make twice.  

"You may love Sonos the product like I do," Cramer said. " But I'm not enamored of Sonos the company, and I think Sonos the stock is way too risky, even as I'm a committed user of their speakers."

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Photo courtesy of Sonos.