Analysts Have Been Trimming Their Sleep Number Corporation (NASDAQ:SNBR) Price Target After Its Latest Report

As you might know, Sleep Number Corporation (NASDAQ:SNBR) recently reported its quarterly numbers. It was a pretty bad result overall; while revenues were in line with expectations at US$393m, statutory losses exploded to US$0.38 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

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After the latest results, the consensus from Sleep Number's five analysts is for revenues of US$1.52b in 2025, which would reflect a small 5.6% decline in revenue compared to the last year of performance. The loss per share is expected to greatly reduce in the near future, narrowing 49% to US$0.48. Before this earnings announcement, the analysts had been modelling revenues of US$1.57b and losses of US$0.52 per share in 2025. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers fell somewhat.

View our latest analysis for Sleep Number

The analysts have cut their price target 17% to US$8.33per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Sleep Number analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$6.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 1.5% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 7.4% decline in revenue until the end of 2025. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.0% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Sleep Number to suffer worse than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Sleep Number's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Sleep Number going out to 2027, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Sleep Number you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.