Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, Raymond (NSE:RYMD) James analyst Bobby Griffin increased the price target for Somnigroup (NYSE:SGI) shares from $62.00 to $67.00, while reiterating a Strong Buy rating. The adjustment follows the successful acquisition of Mattress Firm, which was finalized on February 5, 2025. Currently trading at $55.33, SGI has seen a challenging week with a 10.24% decline, though analyst consensus remains highly bullish with targets ranging from $62 to $81. InvestingPro analysis reveals 13 additional key insights about SGI’s market position and growth potential. Despite a slower-than-expected recovery in U.S. bedding industry demand, with year-over-year trends still in the negative, Raymond James sees a promising outlook for Somnigroup.
The firm’s confidence in Somnigroup is partly due to Tempur Sealy’s consistent market share growth amid stagnant mattress industry trends. Tempur Sealy has also shown enhancements in manufacturing productivity, which is anticipated to contribute to a sustainable gross margin recovery. Projections indicate Tempur Sealy’s like-for-like gross margins could increase by approximately 100 basis points in 2025, adding to the previous year’s expansion.
The acquisition of Mattress Firm positions Somnigroup as a more robust and vertically integrated company. This structure is expected to lead to significant operating leverage once volume trends pick up. Although the integration of Mattress Firm introduces new risks, Raymond James believes the risk/reward profile remains attractive. With current EBITDA of $780.4 million and a "GOOD" Financial Health score from InvestingPro, the firm anticipates Somnigroup to achieve strong EBITDA growth and free cash flow generation, which should facilitate rapid debt repayment and further strengthen its leading position in the U.S. market.
The decision to maintain the Strong Buy rating and lift the price target reflects Raymond James’ belief that Somnigroup represents a solid investment opportunity, especially after the recent decline in stock price. Based on InvestingPro’s Fair Value analysis, the stock appears overvalued at current levels, though the company’s potential for solid financial performance and market dominance in the coming years underpins this positive outlook. Detailed valuation metrics and comprehensive analysis are available in InvestingPro’s exclusive Research Report.
In other recent news, SomniGroup International Inc. reported its fourth-quarter 2024 financial results, surpassing earnings expectations with an adjusted earnings per share (EPS) of $0.60, above the forecast of $0.5843. Revenue for the quarter reached $1.21 billion, exceeding the anticipated $1.19 billion. The company also highlighted the successful completion of its merger with Mattress Firm, which is expected to deliver $100 million in annual synergies by 2028. Additionally, SomniGroup announced the appointment of Steven H. Rusing as the new President of its subsidiary, Mattress Firm Group LLC, effective March 10, 2025. Rusing, who has been with SomniGroup since 1992, will receive an annual base salary of $550,000, along with a signing bonus and relocation payment. In a separate analyst update, Jefferies initiated coverage on Silicon Graphics International Corp. with a Hold rating and a price target of $63, while Truist Securities raised its price target for the company to $75, maintaining a Buy rating. These developments reflect the company’s recent performance and strategic initiatives aimed at strengthening its market position.
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