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On Friday, Raymond (NSE:RYMD) James analyst Bobby Griffin maintained a Market Perform rating on Purple Innovation (NASDAQ:PRPL) shares, as the company trades near $0.89 with a market cap of $97 million. Griffin’s stance follows the company’s fourth-quarter 2024 financial results and the management’s 2025 outlook, which anticipates adjusted EBITDA to surpass consensus estimates despite projecting softer revenue due to demand pressures in the first quarter of 2025. The stock has struggled significantly, down 56% over the past year.According to InvestingPro, Purple Innovation currently trades near its Fair Value, with 12 additional exclusive insights available to subscribers.
Purple Innovation’s management has implemented additional restructuring actions in the first quarter, expected to yield total EBITDA savings of $25-30 million, with $4 million realized in 2024. These measures are seen as a positive step, contributing to improved profit and loss (P&L) and cash flow outcomes, with positive EBITDA and free cash flow (FCF) reported in the fourth quarter of 2024 and anticipated for the full year of 2025.
Despite the company’s restructuring efforts and a unique product offering that could potentially increase market share, the U.S. mattress industry is facing a challenging environment with fluctuating demand. The industry experienced a downturn in late January and February, partly attributed to weather conditions. This creates an uncertain backdrop for Purple Innovation’s turnaround efforts, as well as for larger, well-capitalized competitors.
Griffin noted that while Purple Innovation’s products stand out in the market and could gain traction through additional wholesale opportunities and ongoing innovation, the timeline for a recovery in industry demand remains unclear. Due to this uncertainty and the current state of the market, Raymond James has decided to uphold the Market Perform rating for Purple Innovation stock.
In other recent news, Purple Innovation reported its fourth-quarter 2024 earnings, revealing mixed financial results. The company experienced a decline in net revenue by 11.6% year-over-year to $129 million, yet it managed to improve its gross margins by 970 basis points to 42.9% and achieved a positive adjusted EBITDA of $2.9 million, a significant improvement from a negative $9.8 million in the previous year. KeyBanc analyst Bradley Thomas maintained an Overweight rating on Purple Innovation, with a price target of $5.00, noting the company’s focus on operational efficiency and EBITDA improvement despite a challenging consumer environment. Purple Innovation is also exploring strategic alternatives following unsolicited interest, which could potentially lead to the sale of the company. The company plans to expand its wholesale presence, particularly with partners like Costco (NASDAQ:COST), and aims to increase its wholesale doors by 200-300 by 2025. However, risks such as soft industry trends and potential tariff impacts of $2 million to $5 million remain concerns. Looking ahead, Purple Innovation provided a revenue guidance range of $465-$485 million for 2025, with expectations of flat to $10 million in adjusted EBITDA.
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