Is Casper a Sleeper Pick?
Photo credit: @casper instagram page
Wall Street hasn’t yet bought into Casper’s mission as an end-to-end sleep company, but an e-commerce-centric business model and a shifting focus towards profitability could make Casper a compelling underdog story.
A brand born online: Casper does over 60% of its business online, and that bodes well for the company as consumers increasingly purchase mattresses online. This online-first strategy makes Casper well-positioned to capture market share, according to Wedbush Securities Analyst Seth Basham.
Q1 sales topped analyst’s expectations with DTC sales increasing 13%.
In April, online sales jumped 35% as COVID-19 forced widespread store closures.
Commitment to cost-cutting: In an effort to achieve profitability, Casper recently laid off 21% of its workforce and shut down its European operations. Management said these moves, in addition to keeping marketing spending in check, will save $10 million annually.
The downside: “Casper may have restrained its growth by limiting advertising in an effort to reduce cash burn in an uncertain business environment, effectively leaving sales on the table”- Basham
Lagging online rivals: its online growth was behind Purple’s 140% increase in e-commerce sales during April, UBS points out in a recent report. Wayfair’s 90% jump in online sales also outpaced Casper’s.
What to Watch: consumer spending has held steady despite deep unemployment levels. If the job market takes longer to recover than expected and stimulus checks dry up, new mattresses could end up low on consumers’ shopping lists.
Analysts react to earnings report:
UBS lowers PT to $7.50 from $10, maintains NEUTRAL
Jefferies raises PT to $9 from $8 (BUY)
Wedbush- $7 PT (NEUTRAL)
