Shares of Sleep Number SNBR have soared 110% in the last six months to more than double the Home Furnishing-Appliance Market, as people upgrade their living spaces during the pandemic. More importantly, home buying is surging amid the record-low mortgage rates and a desire for more space during the coronavirus.
Sleep Number is set to release its Q3 FY20 results on Wednesday, October 14. So should investors consider buying the high-end bed firm’s stock as a longer-term bet on the housing market?
The Quick Pitch
U.S. home sales surged 10.5% on an annual basis in August, which came after July’s huge growth that represented the strongest monthly gain ever recorded, dating back to 1968. And now the housing market is finally being driven by millennials, which has industry analysts projecting a multi-year boom for the market, as the largest portion of the generation start to get married and have kids.
For instance, the Construction sector is one of only two of the 16 Zacks sectors that is projected to post earnings growth in the third quarter, with it expected to climb 11%—compared to the Medical sector’s 0.7% and the overall S&P 500’s projected -22.3% decline (also read: Q3 Bank Earnings in the Spotlight Next Week).
Sleep Number itself is not an exact proxy for the broader home market, but it does stand to benefit. The company, which makes high-end adjustable beds, memory foam mattresses, kids beds, bedding, pillows and more is a solid way to play the overall housing market expansion. On top of that, more people are paying attention to their health and self care during the coronavirus, and sleeping plays a vital role.
Sleep Number topped our estimates last quarter, even though its revenue slipped due to pandemic-related store closures. The company noted in its mid-July report that