Purple Innovation Stock Under Scrutiny Amid Strategic Review

Shares of mattress manufacturer Purple Innovation have experienced heightened volatility in recent trading sessions. This price movement follows the company’s latest quarterly earnings release, which painted a mixed picture of operational progress against a backdrop of cautious analyst sentiment.

Profitability Gains Offset Flat Revenue

For the third quarter of 2025, Purple Innovation reported net revenue of $118.8 million, a figure nearly unchanged from the same period last year. The standout story, however, was a significant improvement in profitability metrics. The company’s gross profit surged to $50.9 million, yielding a gross margin of 42.8%. This represents a substantial expansion from the 29.7% margin recorded in the prior-year quarter.

A sharp 23.2% reduction in operating expenses, which fell to $63.0 million, contributed directly to a narrowed net loss. The net loss improved considerably to $11.7 million, down from $39.2 million a year ago. Furthermore, the company achieved a positive adjusted EBITDA of $0.2 million, crossing into profitable territory on this measure.

Strategic Levers for Growth

Management has reaffirmed its full-year 2025 guidance. Revenue is projected to land between $465 million and $485 million, with adjusted EBITDA anticipated to be in the range of $0 to positive $10 million. Two key initiatives are expected to drive this performance: an expanded retail partnership and a new product launch.

Should investors sell immediately? Or is it worth buying Purple Innovation?

The collaboration with retailer Mattress Firm is set to dramatically increase Purple’s retail footprint, potentially growing the number of sales locations from 5,000 to 12,000. This expansion could generate an estimated $70 million in incremental annual revenue. On the product side, the newly launched Rejuvenate 2.0 collection is reportedly performing more than twice as well as its predecessor.

Analyst Caution and Strategic Uncertainty

Despite these operational strides, analyst outlook remains guarded. The current consensus rating among two covering analysts stands at “Reduce.” Their average price target is $1.00, which implies an upside potential of over 20% from recent trading levels around $0.82. A separate analysis from early December maintains a “Hold” rating with an identical price target.

Adding a layer of uncertainty, the company’s board of directors has been conducting a review of strategic alternatives since March 2025. This process encompasses potential transactions including a sale, merger, or other financial maneuvers. The future trajectory of the stock is likely to be heavily influenced by the company’s ability to meet its annual targets and the eventual outcome of this strategic review. The recent stock volatility reflects the market’s weighing of these improving fundamentals against the prevailing skepticism and strategic unknowns.