Should Investors Buy the Dip on Purple Stock?

PRPL’s significant drop softened by 40% growth in the past month

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Purple Innovation, Inc. (NASDAQ:PRPL) is a vertically integrated, technology-based furniture company. PRPL specializes in the direct-to-consumer sale of mattresses, seat cushions, back cushions, pillows, sheets and more, which are supported by the company’s patented Hyper-Elastic Polymer gel technology. At last check, PRPL is trading down 0.8% at $4.92.

Purple stock is down 83% year-over-year and have dropped 63% year-to-date. Purple stock is also up 39% just over the past month and has recovered 66% since bottoming at an all-time low of $2.99 on May 10. Even more, despite several breakout attempts, PRPL's gains remain capped by the 80-day moving average and $6 level.


Nonetheless, Purple stock now trades at a low price-sales ratio of 0.50. Moreover, the mattress company is expected to recover by 2023. Estimates have them growing revenues by 12.7% and returning to profitability with expected earnings of $0.13 per share, making PRPL a strong recovery play over the coming years.

Meanwhile, analysts have been leaning bearish, which comes as little surprise given the stock's long-term underperformance on the charts. Heading into today, six of the nine covering brokerage firms sport a tepid "hold" or worse rating.

Short interest is also inching higher, up 2.2% during the most recent reporting period. This accounts for 8.6% of the stock's total available float, or nearly three days' worth of pent-up buying power.


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