Spring cleaning is all about moving on from things you no longer need, but sometimes you also find some small things that you didn't realize that you still find valuable. It's something to keep in mind when you approach stock picking, because sometimes it's the obscure small caps -- companies with market caps less than $2 billion -- that can be truly valuable.
Sleep Number (SNBR 2.46%), fuboTV (FUBO 2.82%), and Lovesac (LOVE 1.69%), are three small-cap stocks that I think are worth considering for your next portfolio purchase. Let's see why these could be some of the top stocks to buy in April.
1. Sleep Number
We're finally spending less time at home these days, but we're still sleeping at the end of the days. Sleep Number is the maker of the unique air-chambered mattresses with adjustable firmness settings. They say that bedding is cyclical, but Sleep Number has rattled off a dozen consecutive years of positive annual sales growth.
The shares slipped recently after a disappointing but ultimately misunderstood financial report for its holiday quarter. Reported revenue declined 13%, but it would've been very positive if the late arrival of semiconductor components hadn't delayed over $125 million of delivered net sales. The setback is temporary, and the top line still rose 18% for all of last year.
The stock is cheaper than you think. It's trading just eight times trailing earnings, and Sleep Number's guidance calls for earnings per share to climb 10% to 15% in 2022. With a unique product helmed by the Sleep Number 360 smartbed turning sleepy heads, it's an easy to stock to dream about. If you don't see it that way, sleep on it.
We're cutting the cord from cable and satellite TV providers, but a lot of us still need the live sports that we're not getting from the popular live TV streaming services. fuboTV is there to help satisfy that craving. It offers more than 100 live channels on its basic plan, and that includes more than three dozen sports channels.
It's an easy sell, despite a sticker price close to what customers were paying their cable providers. fuboTV boosted its starting monthly rate to $69.99 earlier this week. The platform is still growing quickly. It topped 1.1 million accounts at the end of last year, and it's targeting 1.5 million paying subscribers by the end of 2022. The revenue gains are impressive in its brief life as a public company:
- Third quarter 2020: 71% revenue growth
- Fourth quarter 2020: 98% revenue growth
- First quarter 2021: 135% revenue growth
- Second quarter 2021: 196% revenue growth
- Third quarter 2021: 156% revenue growth
- Fourth quarter 2021: 119% revenue growth
Profitability is a problem given the high costs of content and fuboTV's own investments in gambling initiatives to make its service even stickier. The stock has fallen harder than the other two small-caps on this list, but that also presents an interesting buying opportunity. Analysts see revenue topping $1.1 billion this year, more than fuboTV's current market cap. With viewers shifting to cloud-based video entertainment, fuboTV seems like it's not being appreciated as one of the fastest-growing streaming service stocks.
There's money to be made selling comfort seekers high-end bean bag chairs big enough for an entire small family to use at the same time. Lovesac's also a leader in premium sectionals that can be easily repositioned into new configurations. Lovesac capped off fiscal 2022 by posting blowout financial results on Tuesday. Revenue rose 51% for its fiscal fourth quarter that ended in January, up 55% for the entire fiscal year.
Business picked up after the pandemic -- once we got past the initial production and showroom closures -- but Lovesac's been on a growth tear for the last five years:
- Fiscal 2018: 33% growth
- Fiscal 2019: 63% growth
- Fiscal 2020: 41% growth
- Fiscal 2021: 37% growth
- Fiscal 2022: 55% growth
Growth may slow at this point, but Lovesac's reach is now 146 showrooms strong. It's clearly doing a lot of things right even if it's small in Wall Street's eyes. Sleep Number, fuboTV, and Lovesac have market caps between $775 million and $1.2 billion right now, but they're growing and gaining market share. They may not stay small caps for long.