On Thursday, Sleep Number (NASDAQ:SNBR) Corporation (NASDAQ:SNBR) experienced a revision in its stock outlook by Piper Sandler, with a price target decrease to $12 from the previous $13, while the firm kept a Neutral rating on the stock.
The adjustment comes after Sleep Number reported sales and customer demand that were softer than anticipated in the second quarter. However, the company was able to exceed consensus expectations on the bottom line due to strong gross margin performance and cost reductions.
Management at Sleep Number has reiterated its full-year sales and adjusted EBITDA guidance, opting to raise the high-end expectations for gross margin expansion to over 100 basis points year-over-year, while also revising its demand projections downward for the second half of the year. The company's gross margin is showing positive momentum, and analysts at Piper Sandler project it could reach 60% by the end of the year.
Despite the challenges, Sleep Number is holding onto its market share, although it faces heavy advertising competition from some larger industry players. The company's strategic management of gross margins and costs appears to be a key factor in navigating the current market environment.
The revision of the price target by Piper Sandler follows Sleep Number's latest financial performance and market dynamics. The company's efforts to maintain profitability in the face of softer demand highlight its focus on operational efficiency and financial health.
In other recent news, Sleep Number Corporation has disclosed its Q2 2024 financial results, indicating a slight edge over anticipations in terms of gross margin rate expansion and adjusted EBITDA.
Despite facing a challenging demand environment in the mattress industry, the company remains hopeful about future growth, especially with the introduction of their new Smart Bed, ClimateCool. The company is also implementing various cost-saving measures and anticipates a significant increase in sales and marketing expenses in Q4 due to the Labor Day event.
The company reported adjusted EBITDA of $125 million to $145 million for the full year of 2024, focusing on cost management with expectations to reduce operating costs by $40 million to $45 million. Sleep Number is also planning a gross margin rate expansion of approximately 100 basis points. Despite a decline in net sales leading to a lower adjusted EBITDA of $28 million in Q2, the company maintains a positive outlook.
Piper Sandler has revised Sleep Number's stock outlook following these recent developments, decreasing the price target to $12 from $13 while maintaining a Neutral rating.
InvestingPro Insights
As Sleep Number Corporation (NASDAQ:SNBR) navigates market challenges, the latest data from InvestingPro sheds light on the company's financial health and stock performance. With a market capitalization of $263.45 million, Sleep Number's financial metrics reveal a complex picture. The company's price-to-earnings (P/E) ratio stands at -8.18, reflecting its current earnings challenges. Moreover, over the last twelve months leading up to Q1 2024, the adjusted P/E ratio has further declined to -19.61, indicating increased investor skepticism about future earnings.
InvestingPro Tips highlight that Sleep Number is experiencing a significant debt burden and is quickly burning through cash, which is crucial for investors to consider. Additionally, the company's stock price movements have been quite volatile, with a notable 13.35% return over the last week and a 30.82% return over the last month. However, it's important to note that analysts do not anticipate Sleep Number will be profitable this year, and the price has fallen significantly over the last year, down by 56.71%.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available on the platform. For example, Sleep Number's short-term obligations exceed its liquid assets, and the valuation implies a poor free cash flow yield. These factors, combined with the fact that Sleep Number does not pay a dividend, may influence investment decisions. To explore these insights further, investors can access a total of 13 InvestingPro Tips for Sleep Number at https://www.investing.com/pro/SNBR.
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