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On Thursday, Raymond (NSE:RYMD) James confirmed its Market Perform rating on Sleep Number (NASDAQ: NASDAQ:SNBR) stock. Analyst Bobby Griffin highlighted that Sleep Number’s fourth-quarter adjusted EBITDA narrowly missed consensus estimates by $0.6 million, mainly due to reduced operating expenses and slightly improved gross margins. The company maintains impressive gross margins at 59.6%, according to InvestingPro data, though revenue declined 10.9% in the last twelve months. Despite these factors, the company’s demand trends worsened in the fourth quarter, underperforming the industry, with first-quarter year-to-date figures also down significantly.
Sleep Number has decided not to issue guidance for 2025 at this time, owing to the upcoming CEO transition. This lack of guidance, combined with year-to-date trends and the high level of uncertainty regarding the recovery trajectory for 2025, suggests that consensus expectations for the company may need to be adjusted downwards. These uncertainties include factors such as tariffs, macroeconomic trends, and the consumer’s potential to defer large-ticket purchases. InvestingPro analysis suggests the stock is currently undervalued, with 8 additional exclusive insights available for subscribers.
Griffin reiterated the firm’s stance on Sleep Number, acknowledging the company’s distinctive product lineup that offers individualized comfort and a vertically integrated retail model that provides selling advantages over traditional bedding competitors. This advantage is particularly relevant as health and sleep technology become increasingly important to consumers.
Nevertheless, given the current demand environment and Sleep Number’s high leverage, Raymond James prefers to remain neutral. The firm awaits more stable industry demand before changing its position on the stock.
In other recent news, Sleep Number Corporation reported its fourth-quarter 2024 earnings, revealing a slight beat in earnings per share (EPS) but a notable revenue miss. The company’s EPS was -0.21, slightly better than the forecast of -0.22, while revenue fell short at $377 million compared to the anticipated $413.17 million. Despite the revenue shortfall, Sleep Number improved its adjusted EBITDA by 43% to $26 million, thanks to effective cost management strategies. The company also introduced the Climate Cool series, focusing on higher-margin products, which has been well-received in the market. Analysts have noted that Sleep Number’s stock fell 9.62% in aftermarket trading following the earnings announcement, reflecting investor concerns over the revenue performance. The company is not providing specific guidance for 2025 due to an upcoming CEO transition, with Linda Findlay set to take the helm. Additionally, Sleep Number is exploring debt restructuring options and focusing on cost efficiency and margin improvement. Challenges persist, including supply chain issues and declining consumer sentiment, which have impacted market conditions.
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