Analysts at German bank Berenberg have downgraded mattress maker eve Sleep PLC (LON:EVE) to ‘Hold’ from ‘Buy’ and slashed their target price to 30p from 155p following a weak first-half trading update.
In a note to clients, the bank said while it still expected the firm to progress toward profitability, revenue growth had been much slower than forecast while marketing efficiency was taking time to improve.
READ: Eve Sleep shares plummet as CEO departs following "strategic missteps"
As a result, analysts said the group’s profitability “has likely been delayed” and that they would wait for clarity at the group’s interim results when the outcome of a strategic review would be unveiled.
In a trading update on July 2, eve revealed that it had removed its chief executive, Jas Bagniewski, following a series of "strategic missteps" by its management which saw sales fall below expectations.
The group also said that due to volatile trading patterns and upcoming growth initiatives, the revenue shortfall in the first half was not expected to be recovered in the second half as non-core markets continued to drag on growth.
Berenberg was also cautious on eve’s new retail partnership with UK bed retailer Dreams, in which eve would sell its mattresses in branded space in Dreams stores: “While this clearly gives eve a larger distribution channel, the unit economics are likely to be less favourable for eve and could potentially cannibalise its direct-to-consumer sales.”
In late-morning trading Thursday, eve Sleep shares were up 2% at 25.5p, having declined around 55% on the day of the trading update from around 66p to 29.5p.