Sleep Number has gotten torched over the last six months - since January 2025, its stock price has dropped 49.5% to $7.74 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Sleep Number, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Sleep Number Will Underperform?
Even though the stock has become cheaper, we're cautious about Sleep Number. Here are three reasons why we avoid SNBR and a stock we'd rather own.
1. Flat Same-Store Sales Indicate Weak Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Sleep Number’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Sleep Number’s revenue to drop by 4.6%, a decrease from This projection is underwhelming and indicates its products will see some demand headwinds.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Sleep Number burned through $28.02 million of cash over the last year, and its $934.6 million of debt exceeds the $1.69 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Sleep Number’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Sleep Number until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
Sleep Number doesn’t pass our quality test. Following the recent decline, the stock trades at 1.7× forward EV-to-EBITDA (or $7.74 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. Let us point you toward our favorite semiconductor picks and shovels play.
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