Casper offers shaky growth outlook in its IPO filing
High-tech mattress company Casper made clear it plans to go public on Friday by filing an S-1 with the SEC, which was full of interesting tidbits, including its plan to harness the "Sleep Economy" with the help of its “Sleep Arc.”
What's happening: Casper has helped open up a booming industry and raked in $312 million in the first nine months of 2019. However, its S-1 filing is raising some eyebrows.
Details: Most notable in the filing is the pronounced slowdown in growth since 2017, says Vincent Ning, director of research and operations at online investment advisor Titan.
- "The extent of this deceleration is very concerning, and is far worse than anything we saw during the 2019 batch of unicorn IPOs."
- "Despite that, the company provided little context around this slowdown in its financial disclosures. ... We expect this deceleration will be a central point of focus for investors during the roadshow."
Yes, but: Even though the company is still losing money — a characteristic Wall Street turned against in a major way in 2019 — Casper has begun to stem its losses and is losing less money as it grows, in contrast to companies like Uber and Lyft.
- "However, this apparently came at the cost of a very meaningful revenue deceleration, which may cast doubt for some investors on whether Casper will ever be able to attain adequate operating leverage on it current model," Ning says in an email.
The bottom line: Perhaps the most attractive part of Casper is its gross margins, which "do appear healthy," rising above 50% in the third quarter, "and are on track to place Casper firmly in league with premium-tier Sleep Number territory."