While analyzing the Sleep Number Corp. (SNBR) I discovered an ascending triangle has formed. This is a bullish pattern and a breakout is expected.
SNBR offers individualized mattresses and sleep solutions. Consumers can customize Sleep Number bedding to suit their comforts. The company utilizes algorithms and biometric data for customizations.
The company performed well during the pandemic due to an increased demand for beds and mattresses as consumers made a lot of purchases for the home. SNBR performed well in the fourth-quarter with revenue growing 29% year over year. The company should continue to benefit from an increase in consumer confidence as the economy opens up.
SNBR had only $4 million in cash as of the end of the most recent quarter, compared with $244 million in short-term debt. Its gross margin of 62.3% looks good though, compared with the industry average.
In addition to strong sales, earnings are up 50% over the past year and are expected to rise 36% year over year for the quarter ending in March, and 204% in the quarter ending in June. SNBR is trading at a fair valuation with a forward P/E of 21.98.
While performance is down over the past week, the stock has shown positive momentum over the long-term, leading to a Momentum Grade of B in our POWR Ratings system.
Take a look at the 1-year chart of SNBR below with my added notations:
Chart of SNBR provided by TradingView
Over the past month or so, SNBR has hit $150 as resistance (red) multiple times, while also forming a clear trend line of support (green). Together, these two lines have created an ascending triangle on SNBR.
Eventually, the stock will have to break either the $150 resistance or the triangle support. A long trade could be made on a break above $150.
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Christian Tharp, CMT
SNBR shares were unchanged in premarket trading Wednesday. Year-to-date, SNBR has gained 62.64%, versus a 8.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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