It's been a pretty great week for Sleep Number Corporation (NASDAQ:SNBR) shareholders, with its shares surging 14% to US$63.15 in the week since its latest third-quarter results. It looks like a credible result overall - although revenues of US$531m were what the analysts expected, Sleep Number surprised by delivering a (statutory) profit of US$1.79 per share, an impressive 69% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the six analysts covering Sleep Number are now predicting revenues of US$1.88b in 2021. If met, this would reflect a solid 8.8% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to increase 9.2% to US$3.97. Before this earnings report, the analysts had been forecasting revenues of US$1.81b and earnings per share (EPS) of US$3.14 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a sizeable expansion in earnings per share in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 17% to US$53.25per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Sleep Number analyst has a price target of US$80.00 per share, while the most pessimistic values it at US$37.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We can infer from the latest estimates that forecasts expect a continuation of Sleep Number'shistorical trends, as next year's 8.8% revenue growth is roughly in line with 7.7% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 9.3% next year. So although Sleep Number is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Sleep Number following these results. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
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 estimates - from multiple Sleep Number analysts - going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Sleep Number , and understanding them should be part of your investment process.
This article by Simply Wall St is general in nature. 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.
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