New York-based Warby Parker Inc. (NYSE: WRBY) has expertise in manufacturing eyewear products, including eyeglasses, lenses, and sunglasses. It also provides multiple accessories like anti-fog sprays, cases, and pouches, and conducts vision tests and eye exams.
Founded in 2010, the company has built a name for itself in the vision products field. To explore its opportunities further, the company went public on September 21, 2021, through a direct listing on the NYSE (DPO—direct public offering). The offering included the company’s Class A common shares, with an issue price of $40 per share.
In the first two months of its listing on the stock exchange, Warby Parker enjoyed an uptrend in its share price, while a downward trend was visible thereafter. The struggle with falling prices seems to be still on. Despite the lack of momentum in its share price, the company still looks attractive to customers and analysts.
Per TipRanks, the company has a Moderate Buy consensus rating based on five Buys and five Holds. Interestingly, WRBY’s price target of $22.80 mirrors 50.10% upside potential from current levels.
Now, let’s talk about the company’s journey since its listing.
Initial Success & Present Condition
The DPO of Warby Parker was successful, as each share fetched the company a higher price than the issue price of $40. On September 29, 2021, the stock opened at $54.05 (a premium of 35.1% over the issue price) and closed at $54.49 (36.2% above the issue price).
Since its listing, WRBY stock has plummeted 69.4%. Its closing price on June 8, 2022, was $16.65, and its market capitalization stood at $1.91 billion.
Since its listing on the exchange, Warby Parker has reported results for the last two quarters of 2021 and the first quarter of 2022. It recorded losses in all three quarters, exceeding the consensus estimate in one and lagging the same in two quarters.
In the first quarter of 2022, the company’s loss stood at $0.30 per share, compared with the consensus estimate of a break-even point. Its revenues of $153.2 million were below the consensus estimate of $154.1 million.
In February 2022, Warby Parker announced that >10 million pairs of glasses were distributed to the needy under its Buy a Pair, Give a Pair program. In March 2022, the company and Eastman Chemical Company (NYSE: EMN) unveiled a molecular recycling program for demo lenses.
Growth Drivers, Headwinds & Projections
In the first quarter of 2022, Warby Parker’s sales accounted for just 1% of the industry’s top line, and its store count was 169 versus 41,000 optical shops in the country. This signifies immense growth potential exists for the company in the $44-billion U.S. eyewear market. Also, it can be deduced that competition in the field is tough.
In all scenarios, solid product offerings, a direct-to-consumer business model, and a commitment to help the needy and deprived will likely set the course for WRBY.
In the years ahead, Warby Parker intends to increase its store count to more than 900. Further, it anticipates revenue growth to be >20%. In 2022, the company intends on adding 40 new retail stores. It anticipates revenues to increase 20%-22% year-over-year to $650-$660 million in the year. Net revenue growth for the second quarter is expected to be 13%-15%.
On the flip side, high costs of revenue and operating expenses, especially those related to headcount increase and operations, can be concerning for the company.
The company’s Co-Founder and Co-CEO, Dave Gilboa, opines that the company is well-positioned to operate in “both good and turbulent environments,” deriving strength for its “omnichannel business model, compelling value proposition, and strong consumer brand.”
A few days ago, Paul Lejuez of Citigroup reiterated a Buy rating on WRBY while lowering the price target to $29 (74.17% upside potential) from $41.
Another analyst, Kimberly Greenberger of Morgan Stanley maintained a Hold rating on WRBY while decreasing the price target to $17 (2.10% upside potential) from $24.
TipRanks’ Website Traffic tool suggests that the momentum is strong for WRBY at present. The footfall on the company’s website increased 9.4% year-over-year in May 2022, 3.10% quarter-to-date, and 11.01% year-to-date.
The increased number of visits to the company’s website alludes to the fact that the company’s performance could remain solid in the upcoming quarters.
Amid multiple challenges, Warby Parker has a spark that can attract risk-takers and long-term investors. The share price dips can be effectively used to gain exposure to the stock.
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