Shares of Select Comfort fell on Tuesday after Wedbush Sercurities analyst Seth Basham cut his rating on the Plymouth-based company from "outperform" to "neutral."
"We have witnessed intense promotional and advertising activity in recent weeks, which combined with our store checks, lead us to believe that the company is tracking below 4Q guidance and consensus expectations," Basham wrote.
Select Comfort doesn't comment on analyst recommendations but the company's public relations manager, Maggie Habashy, said "we plan our promotions months in advance and are currently following our typical seasonal promotions."
Shares of Select were down more than 7 percent at one point Tuesday before finishing down 5.1 percent or, $1.18 per share, to $21.79. Shares are rebounding somewhat on Wednesday and were up 53 cents in morning trading. On the year Select shares remain up about 4.4 percent.
In addition to moving from a buy to a sell rating Basham also moved his 12-month price target from $25 to $22 per share.
According to Thomson Reuters, the mean view among analysts is that the company will report $315.3 million in sales during the fourth quarter, and earn 32 cents per share. Basham moved his fourth quarter earnings per share target from 35 cents to 27 cents per share.
Basham admits it's difficult to measure advertising spending but anecdotally he's witnessed more TV and digital advertising from Select and noted a new financing offer.
While Basham is pulling back his short-term recommendation he did add "substantial opportunity remains to drive much higher earnings medium term."
Select's fourth quarter ends Dec. 31 and will report its quarterly and full-year results in mid-February.
