Sleep Number Spikes 13% After Blowout Quarter; Street Says Hold

Sleep Number Corp.’s shares surged 12.9% in after-hours trading on Feb. 17 as the beds and mattress company reported a better-than-expected profit in the fourth quarter.

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The company posted 4Q diluted earnings per share (EPS) of $2.19, beating analysts’ estimates of $1.44. Revenues rose by 29% to $568 million year-on-year and came in ahead of consensus estimates of $551.5 million.

Sleep Number’s (SNBR) CEO, Shelly Ibach said, “In a year of challenge and change, our mission-driven team delivered exceptional results by leveraging the power of vertical integration, digitization and focusing on what matters most to our stakeholders. With strong momentum in the first quarter and ongoing investments in sleep science-based innovations and digital technologies, we are well-positioned to generate sustainable profitable growth for years to come.”

The company generated $280 million in net cash from operating activities in FY20, up by 48% year-on-year with operating free cash flow of $243 million, up by 87% year-on-year.

In FY21, Sleep Number expects earnings per diluted share of $6, which would mark a 30% increase year-on-year. The company forecasted capex to range between $70 million to $75 million. (See Sleep Number stock analysis on TipRanks)

Sleep Number shares have recently seen a great run as the stock surged about 47% so far this year.

On Feb. 10, Wedbush analyst Seth Basham more than doubled the stock’s price target from $52 to $120 but reiterated a Hold rating. Basham noted that the shares had recently gone “parabolic”, rising more than 106% since the company’s 3Q earnings call in October.

The analyst argued that SNBR did not appear to be caught up in the “recent short-squeeze frenzy, with only 13% of the float short, though that figure is up from about 10% in October.”

The rest of the Street is sidelined about the stock with a Hold consensus rating. That’s based on 1 analyst recommending a Buy, 2 analysts a Hold and 1 analyst a Sell. The average analyst price target of $105.33 implies about 12.2% downside potential to current levels.