UBS Starts Select Comfort (SCSS) at Sell
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UBS initiates coverage on Select Comfort (NASDAQ: SCSS) with a Sell rating and a price target of $20.00, saying while it is a strong niche player, its positioning is awkward.
Analyst Michael Lasser commented, "We understand the allure of SCSS' bull case w. easy NT compares due to idiosyncratic factors, well-regarded products & further store growth. This is transposed against a rich history of private market activity in the space. However, we think these considerations are more than offset by increasing competition, reliance on existing customers (1/3 sales are to repeat customers/referrals), susceptibility of its biz model to external shocks, less operating flexibility, & lofty expectations. The consensus assumes 10% sales growth & 120 bps of OM expansion in '17. Plus, we doubt SCSS can continue to push AUP higher (already at $4,206) in a consolidating & increasingly transparent market."
Shares of Select Comfort closed at $22.82 yesterday.
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