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Einhorn's Greenlight Reportedly Lifts Stake in Sonos

'We think that there is a long-term household penetration story here' for Sonos, Greenlight Capital's David Einhorn said in a letter to hedge fund investors.

Sonos  (SONO) - Get Sonos, Inc. Report shares rose Wednesday, after a report said that star investor David Einhorn’s Greenlight Capital investment firm raised its stake in the premium sound system company.

Einhorn wrote in a letter to his hedge fund’s investors that it has lifted a small Sonos holding “to a size that makes it worthwhile to discuss.” The letter was obtained by CNBC. Sonos represents a “bright growth story,” Einhorn said.

Sonos stock on Wednesday closed at $32.81, up 2%. The shares have surged 40% in the year to date amid strong demand for the company’s products during the pandemic.

“We think that there is a long-term household penetration story here,” Einhorn said. “SONO products are currently in approximately 11 million homes globally, a number that has grown by at least 20% in each of the last four years and stands to grow further.”

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That will happen “as SONO adds more accessible price points, expands into new verticals, and introduces new products and services,” he said.

Further, “While we acknowledge that there are near-term headwinds in the form of supply chain disruptions and a cyclical normalization in consumer electronics demand, we think these will prove to be temporary distractions in an otherwise bright growth story,” Einhorn said.

“Between an elevated backlog of orders that will support demand well into the next year and strong pricing power, we see earnings growing close to 25% annually for the next few years.”

A closely watched lawsuit over home audio patents could eventually provide a boost for Sonos, reported Sept. 30.