Author Topic: SNBR - Sleep Number Corp  (Read 510 times)

nickenumbers

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SNBR - Sleep Number Corp
« on: January 22, 2019, 07:00:40 AM »
All,

I will cut to the chase, I think this investment is Dead on Arrival.  I might be missing something and if someone has an alternative perspective I would enjoy hearing it.


SNBR came across my radar as a company that is repurchasing a significant portion of it's own shares.  Cannibal.  But, I performed a DCF on it and the conservative IV that I calc-ed was about $24.  It is presently trading for about $35.30.

I don't know where to start.  It levered up with debt to repurchase it's own shares.  It burned thru all of it's cash reserves.  It is going to have to devote a lot of it's FCF now to service the debt, and it is not going to have much FCF remaining to continue to repurchase it's shares on a continuing basis.  I don't think that I love the underling product, competition, growth and market.

I don't know what to tell you guys, but it sucks worse than a bucket of ticks.  I am not a fan of shorting or put options unless the subject is a cinch.  Perhaps one of you would feel more comfy to make an investment in that direction.  I am either putting it in the No/Pass, or the Too Hard pile.

Let me know if you all see something that I missed, or confirming?

The fastest Cheetah still waits for the lame baby antelope.  ..patience..


LongHaul

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Re: SNBR - Sleep Number Corp
« Reply #1 on: January 22, 2019, 11:53:36 AM »
All,

I will cut to the chase, I think this investment is Dead on Arrival.  I might be missing something and if someone has an alternative perspective I would enjoy hearing it.


SNBR came across my radar as a company that is repurchasing a significant portion of it's own shares.  Cannibal.  But, I performed a DCF on it and the conservative IV that I calc-ed was about $24.  It is presently trading for about $35.30.

I don't know where to start.  It levered up with debt to repurchase it's own shares.  It burned thru all of it's cash reserves.  It is going to have to devote a lot of it's FCF now to service the debt, and it is not going to have much FCF remaining to continue to repurchase it's shares on a continuing basis.  I don't think that I love the underling product, competition, growth and market.

I don't know what to tell you guys, but it sucks worse than a bucket of ticks.  I am not a fan of shorting or put options unless the subject is a cinch.  Perhaps one of you would feel more comfy to make an investment in that direction.  I am either putting it in the No/Pass, or the Too Hard pile.

Let me know if you all see something that I missed, or confirming?



Funny post!

Product.  Massively helped my lower back problems.  I put it on the highest setting and it really helped.  Went thru about
20+ other solutions but this really helped me.  Personal situation though.

The product also can last a very long time as it is an air bed and you can just buy replacement parts (or perhaps fix) vs getting a new mattress every 7-10 years.  For me that was worth a premium.






philly value

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Re: SNBR - Sleep Number Corp
« Reply #2 on: January 22, 2019, 11:58:10 AM »
I know nothing about the business but am interested in potential short opportunities in companies that have/are underinvesting in their business and utilizing resources to buyback shares, especially when it involves levering-up to do so. Obviously buybacks are often a good thing for undervalued businesses but they can also be destructive if a company is neglecting its operations to focus on financial engineering.

Here the magnitude doesn't seem interesting, however. Looks like they have $135mm of debt vs. a $1.2 billion market cap and debt is 1x trailing EBITDA and <1x forward EBITDA. FCF is roughly equal to net income and debt service will be a very small fraction of FCF/NI. So I am not sure what you are seeing here but it is not what I am seeing.