Phrases like “investment” and “a good night's sleep” don't commonly go together. For a lot of investors out there, especially these days, the frantic up-and-down of market action produces sufficient adrenaline to leave nails bitten and antacids chugged. There's one investment out there, however, that looks like it will produce a good night's sleep from two different directions: Sleep Number (NASDAQ:SNBR).
A Good Night's Sleep an Investment Away
Sleep Number recently rolled out its quarterly numbers, and for those who parked part of their nest egg with the company, the peace of mind generated therein should be fantastically restful. The quarterly numbers saw profit go to $51.32 million, which approaches double the figures generated the same time last year at $28.1 million. That means profit of $1.79 per share, again almost double last year's figure of $0.94. Net third-quarter sales featured a 12% rise, hitting $531.2 million over the $474.8 million posted this time last year.
Great figures by themselves, but even better, they dwarf analyst expectations. A Thomson Reuters consensus poll found Sleep Number was targeted for revenues of $515.82 million yielding earnings of $1 per share even. The company also rolled out full-year expectations, targeting a total gain of around $4 per share, with analysts once again on a much lower cant, targeting $2.77 per share.
An Even Brighter Future Ahead
All of this is terrific, but in order for Sleep Number to be a worthwhile buy, it's going to have to do this again, or at least something close to it. That may not be the problem some may think; based on word from the company's CEO, Shelly Ibach, the demand growth curve the company saw this quarter represents part of the “third consecutive year” of such gains seen. Ibach traces this growth curve back to the company's move to “smart beds”, as well as its “vertical business model.”
Further reports note other positive growth vectors for the company; its focus on digital marketing, especially through online sources, is spurring growth in not only online sales—which makes sense, as when done correctly, online advertising can be immediately convertible into online sales—but also brick-and-mortar sales, which is something of a feat given what the last six months have looked like for brick-and-mortar selling in general.
Even better, current trends in mattress sales are giving innovators like Sleep Number extra help in the field. Traditional innerspring mattress sales have been on a decline for some time now, and memory foam, air-adjustable, and various hybrids have been gaining that market share.
The Analysts are Less Convinced
Despite some fantastic numbers and some very convincing prospects for the company, the analyst picture looks like a market in repose. Our latest research shows the company has held a “hold” rating for the last six months, and the consensus doesn't look like it's budging. There have been some slight gains, but the biggest difference between today and three months ago is one “hold” analyst who left the field altogether; 90 days ago, the stock had two “sell” ratings, four “hold”, and one “buy.” Today, it's identical, except now the stock has just three “hold” ratings, as if one analyst departed analysis on the company altogether.
However, the company's price target has been trending upward nicely, so those who are sticking around expect big things to come from Sleep Number. The current consensus price target is $49, up from $47.33 30 days ago and $37.63 180 days ago.
Circumstances Supportive as a Mattress
Certainly, Sleep Number has benefited from the “everything-from-home” phenomenon of the last six months. With vacations canceled and people using the cash on home renovations instead, it's little surprise that people took a look at their beds—where they spend about a third of their lives, after all—and realized it was high time for an upgrade. That the upgrades are going to Sleep Number isn't too much of a surprise; the company has made a lot of hay while the sun shines on its innovative prowess.
Granted, the everything-from-home boost can't go on forever; people can really only upgrade their bed once and then probably not again for several years. But with Sleep Number winning new customers, and seeming fairly devoted to keeping same through innovative products and quality customer service, any future moves will likely be kept in the Sleep Number family of products. That bodes well for the company's long-term prospects. Even if coronavirus suddenly vanished tomorrow, we'd still spend about a third of our lives in bed, and why shouldn't that third be comfortable?
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