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On Friday, KeyBanc analyst Bradley Thomas maintained an Overweight rating on Purple Innovation (NASDAQ:PRPL) with a steady price target of $5.00, significantly above the current trading price of $0.66. According to InvestingPro data, the company’s market capitalization stands at just $71.47 million, with the stock currently trading near its 52-week low. Thomas highlighted that Purple Innovation reported mixed results for the fourth quarter, with sales falling short of expectations but EBITDA surpassing them, though trailing twelve-month EBITDA remains negative at -$35.35 million. This performance was attributed to the company’s focus on operational efficiency and EBITDA improvement despite a challenging environment for consumers and the mattress industry.
Purple Innovation also announced it is exploring strategic alternatives after receiving unsolicited interest, which could potentially lead to the sale of the company. This follows a pattern of transactions observed in the sector over recent years. Thomas expressed optimism about Purple Innovation’s growth potential due to its unique product offerings and the possible benefits from strategic alternatives. InvestingPro analysis reveals several challenges, including significant debt burden and cash burn concerns, making strategic alternatives particularly crucial for the company’s future. For deeper insights into Purple Innovation’s financial health and valuation metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The company is expected to further penetrate the wholesale market, recently expanding its presence in Costco (NASDAQ:COST), and plans to grow its wholesale doors by approximately 200-300 in 2025. Improved incremental margins of around 35% were also noted, reflecting management’s efforts to optimize the business.
However, Thomas pointed out several risks, including soft mattress industry trends and a weaker Presidents’ Day sales period. The post-transaction supply agreement with SGI, which is a significant source of revenue for Purple Innovation, was also mentioned as a potential risk. Additionally, while tariffs are not a major part of the cost of goods sold (COGS), exposure to China and Mexico could present a headwind of about $2 million to $5 million, based on current proposals.
In other recent news, Purple Innovation Inc. reported its fourth-quarter 2024 earnings, revealing a mixed financial performance. The company experienced an 11.6% decline in net revenue year-over-year, totaling $129 million, which was a slight miss against forecasts. However, operational improvements were evident, with gross margins increasing by 970 basis points to 42.9%, and adjusted EBITDA improving to $2.9 million from a negative $9.8 million the previous year. Looking ahead, Purple Innovation has provided a revenue guidance range of $465-$485 million for 2025, with expectations of flat to $10 million in adjusted EBITDA.
Additionally, the company has announced the launch of its new REJUVENATE 2.0 mattress line, which is expected to contribute to revenue growth in the second half of 2025. The company is also focusing on its cost-saving initiatives, which are projected to yield significant savings. Meanwhile, analysts did not provide any recent upgrades or downgrades for the company’s stock. Purple Innovation’s strategic focus remains on controlling costs and executing its growth strategy, according to CEO Rob DeMartini. These developments come amid challenging industry conditions and weak consumer demand.
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