How much is a good night's sleep worth? A lot to these stocks


If you’re anything like most Americans, you may not feel that you get enough sleep each night. According to the National Sleep Foundation, 63% of U.S. adult Americans sleep less than seven to nine hour a night. The importance of getting some Z’s is also becoming more widely recognized. Anna Pione, McKinsey’s partner who heads the firm’s research into the future of wellbeing, said: “What we observed in our research was that over the past five to ten years, consumers have become more accepting and aware of the importance of sleep and mindfulness as it relates their overall health. In a McKinsey 2022 survey, about 50% of Americans ranked wellness as their top priority. This is up from just 42% in the 2021 survey. According to the survey, improving sleep was the second-highest priority after better health. 45% of respondents rated it as a “very important priority.” Over a quarter of respondents said that they will definitely give sleep a higher priority in the next 2 to 3 years. McKinsey surveyed more than 2,000 U.S. consumer. Sleep products range from sleep apnea machines and wearable tech to mattresses and sleep supplements. Studies are being conducted to determine the effect of weight loss drugs on sleep apnea. Mattress companies are the obvious winners of this trend, as sales soared during the pandemic, when people were more focused on getting enough z’s and on their overall wellness. According to the International Sleep Products Association, sales have dropped, with wholesale dollars down 10% and total units down 20.3% compared to 2022. Seth Basham, an analyst at Wedbush, believes that the industry has bottomed out. Seth Basham’s top pick is Tempur Sealy International, which he included on the firm’s list of best ideas in May. Stocks have already risen 37% this year, and the stock hit a new 52-week high last Friday. Basham believes there is still more potential. Basham’s price target of $55 represents a nearly 17% increase from Friday’s closing. He said that not only does it benefit from the health and wellness trend but also consumers are trading up. He said that this helps Tempur Sealy which is the most well-known brand in the industry. Basham stated that more consumers were willing to pay whatever it took to have a good sleep. This included a quality mattress. Basham also sees margin tailwinds because of lower commodity costs, and a huge opportunity with the proposed acquisition by Mattress Firm. TPX Mountain Tempur Sealy 5 year performance It’s not just a comfortable place to sleep. The mattress industry is using technology to help their customers sleep better. Tempur offers adjustable “smart bases” that analyze and track sleep patterns, and offer consumers coaching on how to improve. The bed can also detect snoring, and adjust the mattress automatically. Purple Innovation and sleep number also offer smart beds. Sleep is important for your health and longevity. According to the Centers for Disease Control and Prevention, it’s associated with higher risk of chronic diseases like diabetes, cardiovascular disease and obesity. Stefano Natella is the head of equity at Guggenheim. He said that sleep deprivation increases cortisol in humans, which makes them insulin resistant. Insulin resistance also causes them to be more metabolically challenged and more likely to suffer from metabolic syndrome. Natella studied sleep in his research on longevity and aging. “If you have metabolic syndrome, your risk for cancer, cardiovascular problems, Alzheimer’s and other diseases is higher. You see the entire chain,” he said. The quality of your sleep, not just the time you spend in dreamland, is important. Natella’s research included a study that involved more than 15,000 Chinese seniors aged 65 or older, with 2,794 of them being 100 years old and older. After adjusting for factors such as social status, health and education, the study found that centenarians are 70% more likely than younger cohorts to get good sleep. Sleep disorders can affect your ability to sleep well. Conditions like sleep apnea and insomnia are examples of health conditions that may impact sleep quality. According to the CDC, 1 in 2 American adults will experience short-term sleeplessness at some point during their lifetime, and 1 in 10 could have chronic insomnia. Melatonin (Unilever’s Ollie) or prescription drugs like benzodiazepines, such as Xanax, Klonopin, and zolpidem are some of the options that people may choose. Seamus Fernandez, analyst at Guggenheim, said that sleep management drugs tend to have addictive properties. “They can have negative side effects, and they can affect sleep quality in a negative way.” According to the American Journal of Respiratory and Critical Care Medicine, around 20% of adults worldwide have moderate to severe sleep apnea. Obstructive Sleep Apnea is characterized by breathing interruptions during sleep. According to the American Medical Association, 30 million Americans are affected by this condition. However, only 6 million of them have been diagnosed. People with this condition are at a higher risk of having a heart attack or stroke if they do not receive treatment. Several companies manufacture medical technology to treat obstructive sleeping apnea. ResMed, which makes continuous positive airway pressurization (CPAP) machines to treat this condition, has a weighted average analyst rating and a 50% increase in the analyst’s average price target. Several firms noted that the company has the opportunity to gain market shares thanks to the 2021 Philips CPAP recall. Mizuho initiated coverage in April, with a Buy rating and a $255 price goal, suggesting a 60% increase from Friday’s closing. The U.S. market is estimated at $3.5 billion with a potential to reach $6 billion in the next three or four years. Bank of America Securities also believes ResMed will be successful in the long term, despite a disappointing earnings report for its fiscal fourth-quarter in August. Inspire Medical Systems has a different strategy and is trying to disrupt the CPAP market by using an implantable system to monitor breathing and to open the airway. Bank of America has also given Inspire a buy rating, noting the early stages of its development. In July, about half of the patients surveyed by Bank of America in their obstructive snore apnea survey had not heard of Inspire. Less than 30% of those surveyed said they would be likely or very likely to use Inspire’s device. Medical device stocks have been affected by the recent rise in weight-loss drugs. ResMed has fallen 23.5% this year while Inspire is down 5%. Philips has actually gained 46% in this year. This is a rebound from the 59% loss it suffered in 2022 due to uncertainty surrounding its product recall. Sleep apnea can be reversed by losing weight. It is often associated with obesity or overweight. Eli Lilly, the manufacturer of Mounjaro, is currently running a study to determine how its drug affects patients with obstructive apnea. LLY 1Y Eli Lilly mountain’s performance over a year “It’s definitely a value-added chance.” Fernandez of Guggenheim, who rates both Eli Lilly’s and Novo Nordisk as buys, said that it was a good trial. Semaglutide is the active ingredient of its diabetes and obesity medicines Wegovy, and Ozempic. The company recently reported that patients who took it saw a 20% reduction in heart attacks and strokes. Michael Farrell, ResMed’s CEO, said that three factors will reduce the impact of GLP-1s on the company. These are high costs, low adherence, and side effects. “Look, it’s going to be a long journey. It’s good marketing in the obesity area and can bring patients to the funnel. “I don’t believe it will have a significant impact on patients, because there are 936 millions of us worldwide,” he said. Bank of America’s survey of patients suffering from obstructive apnea concluded that it was still too early to determine the effects of new weight-loss drugs such as Ozempic or Mounjaro. Some 82% of those surveyed haven’t tried them. Only 2% of those who tried them said that they had a significant enough effect to stop using their CPAP, and 26% reported a minor benefit but still needed the CPAP. According to the survey, 70% of respondents said they had no impact. NVO 1Y mountain Novo Nordisk’s one-year performance This said, any good news about sleep apnea and GLP-1s will help to drive shares higher for both Eli Lilly, and Novo Nordisk, Fernandez stated. He thinks Eli Lilly will have a clinical outcome in two to three more years. It’s hard to believe that people could be more excited about Eli Lilly or Novo given the rise in their stocks,” he said. “The more diseases you can prove and the risk reductions you can demonstrate, the better you will be able to justify the price of these products each year and the greater the number of patients that can benefit from them over time.” Wearables are also a part of wellness, with apps to track fitness goals or even sleep. Apple, Fitbit, Garmin and Fitbit are all involved in this space. But according to Gene Munster, partner at Deepwater Asset Management, Apple has the advantage. He said that the wearables players are so small in comparison to Apple Watch, and will become less relevant with more features. He said that the Apple Watch, while only making up about 6%, is growing. He believes that gamifying the sleep experience is the next step, and maybe even integrating with mattress manufacturers to obtain better sleep data. Apple Watches are not the only devices that can improve sleep. Jason Ware is chief investment officer of Albion Financial Group. He said that the company would also receive a share of profits from other sleeping apps developed on its OS. Ware owns Apple shares for more than a decade. Ware stated that the ecosystem is bigger than Apple’s apps, and can be very lucrative. There are many opportunities for companies who want to enter the sleep market. Experts said that sensors on mattresses and the app technology will continue to improve. Munster believes that the greatest opportunity lies in managing blue-light. He said that people’s addiction to devices is the reason why sleep can be so difficult. Better blue light management can help people sleep better. McKinsey found that the biggest unmet need in wellness was sleep. Pione stated that there is a great deal of room for growth in the area of smart hardware, monitoring tools and some baby sleep products. We’ve seen a lot of innovation over the past two, three, or four years. “I think that’s where a lot of these companies have been on an even steeper upward trajectory in terms of growth.” There’s more headroom there. Michael Bloom, CNBC’s reporter, contributed to this report.