Piper Jaffray Loses Comfort With Sleep Number

Sleep Number Corp (NASDAQ: SNBR)'s second-quarter earnings may have fallen in-line with the consensus, but the company's sluggish sales growth and escalating competition are concerning, according to Piper Jaffray. 

The Analyst

Analyst Peter Keith downgraded Sleep Number from Overweight to Neutral and lowered the firm’s price target from $41 to $33.

The Thesis

While Q2 earnings were in-line, they were "relatively disappointing," Keith said. 

“Despite a revolutionary product line refresh, sales trends remain surprisingly sluggish”, the analyst said.

Unimpressive sales growth could be the result of increasing competition from low-price import mattresses, Keith said. 

“While SNBR deserves credit for being highly innovative and differentiated, its smart bed technology does not seem be broadening its consumer funnel in a meaningful way." 

This sales growth trend — driven by a competitive industry backdrop — has raised concerns over guidance going forward, making Sleep Number's 2019 EPS target of $2.75 “increasingly unlikely," the analyst said. 

Piper Jaffray lowered its 2019 EPS estimate from $2.44 to $2.19.

Price Action

Sleep Number shares were trading down 4.42 percent to $29.61 at the time of publication Thursday.

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Photo courtesy of Sleep Number.