On Thursday, Piper Sandler adjusted its outlook on Sleep Number (NASDAQ:) Corporation (NASDAQ:SNBR), increasing the stock price target to $13 from the previous $12 while maintaining a Neutral rating on the stock. The firm based this decision on Sleep Number’s first-quarter performance, which aligned with expectations, and the company’s decision to sustain its guidance for the full year.
Sleep Number’s demand trends continued to match the overall industry performance, with a mid-single-digit percentage decline in the first quarter and the same trend observed in April month-to-date.
The updated guidance suggests an anticipated recovery in margins, attributed to a shift from notable year-over-year sales declines in the first half of the year to a modest year-over-year sales growth in the second half, particularly as the company moves past backlog revenue challenges.
The company’s debt leverage, which currently stands at 4.2 times, is projected to improve to 3.75 times by the end of the year. This improvement is expected as Sleep Number transitions towards modest year-over-year sales growth in the latter half of the year. Moreover, the gross margin is forecasted to be on a path to recovery, driven by a combination of sales growth, product mix, and cost reduction efforts.
The stock price target of $13 reflects a 12 times multiple of the estimated 2025 earnings per share, indicating a conservative but positive adjustment based on the company’s current trajectory and financial health. Sleep Number’s management appears to be navigating through industry trends and internal challenges with strategies aimed at strengthening the company’s financial position by the year’s end.
remove ads
.
InvestingPro Insights
With Sleep Number Corporation (NASDAQ:SNBR) in focus, valuable insights emerge from InvestingPro data. The company’s market capitalization stands at $330.43 million, reflecting its position in the market.
Despite a challenging period, the company has shown a strong return over the last three months, with a 23.59% price total return, signaling a potential turnaround in investor sentiment. Still, this positive trend is set against a backdrop of a 45.96% decline over the past year, emphasizing the stock’s high volatility.
The company’s financial health shows areas of concern, with a negative P/E ratio of -8.91, indicating that investors are wary about future earnings potential. Moreover, the revenue decline of -13.36% over the last twelve months as of Q1 2024 underlines the challenges faced by the company in generating top-line growth. The gross profit margin remains robust at 57.58%, suggesting that despite revenue headwinds, the company maintains a strong grip on cost management.
InvestingPro Tips highlight critical aspects of Sleep Number’s current situation. The company operates with a significant debt burden and short-term obligations exceeding liquid assets, which may impact its financial flexibility. Also, analysts do not anticipate the company will be profitable this year, and the stock has been trading at a high EBIT valuation multiple.
These factors, combined with a lack of dividend payments, could influence investment decisions. For readers interested in a deeper dive, InvestingPro offers additional tips on Sleep Number, and by using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
remove ads
.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
