Insights

Here’s Why Sleep Number Stock Surged Today

What happened

Shares of mattress company Sleep Number (NASDAQ: SNBR) surged on Thursday, after the company’s financial results for the second quarter of 2022 beat analysts’ expectations. As of 11:15 a.m. ET today, Sleep Number stock was up 13%.

So what

For the second quarter, Sleep Number generated net sales of $549 million, up 13% year over year. For perspective, this wasn’t an easy feat considering net sales were up 70% year over year in the same quarter last year. And with higher sales came higher profitability. Second-quarter diluted earnings per share (EPS) of $1.54 were up a whopping 75% from last year.

It appears that investors were happy to see Sleep Number surpass expectations even though there’s a headwind blowing in the second half of 2022.

Now what

I’m personally surprised to see Sleep Number stock up today. The stock market is forward-looking. And as previously alluded to, Sleep Number has some challenges ahead. Management actually lowered its full-year EPS guidance to a range of $3 to $4. Based on the previous guidance range, this is a sharp reduction of 20% to 50%.

Sleep Number’s profit margins are getting squeezed in part due to higher material costs from inflation. Moreover, consumer demand for its mattresses is going down, and the company is making up for this by working through its backlog of orders. Because of all this, management has decided to pause share repurchases, a key component in the stock’s performance over the last decade. 

Having said all of this, Sleep Number historically has had some cyclicality in its sales. Therefore, seeing a pullback in demand and a hit to profitability isn’t an urgent concern for shareholders. It’s happened before, and the company recovered each time.

Moreover, with Sleep Number stock trading at a price-to-sales ratio of less than half of its trailing sales, it seems the market is already pricing this company at a discount. And this could limit further downside if management successfully navigates challenges in the second half of the year.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Sleep Number Corp. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info