On Friday, Warby Parker Inc. (NYSE:WRBY) received an upgrade from Market Perform to Market Outperform by JMP Securities, with a new price target set at $20.00. The upgrade reflects a positive outlook on the company's future performance, with expectations of a mix-shift toward corrective eyeglasses and the company's solid market share dynamics.
The firm believes that consensus estimates for Warby Parker's revenue and earnings for 2025 and 2026 may be underestimated. This view is based on early indicators of consumer spending shifts and the company's consistent performance in gaining market share. Additionally, the anticipated operating leverage is expected to contribute to the company's growth.
JMP Securities has raised its top- and bottom-line estimates for Warby Parker, suggesting that the company's shares have upside potential as industry volatility decreases. The firm's analysis points to Warby Parker's expansion of its holistic vision care offerings and an increase in in-network coverage as key factors for the company's growth.
The firm also anticipates that Warby Parker's management will provide increasingly positive commentary in the upcoming quarters. Despite expecting the path forward to show volatility and a non-linear progression, the firm's outlook remains optimistic about Warby Parker's trajectory.
The new price target of $20.00 for Warby Parker's stock is based on an enterprise value to estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple of approximately 25 times. This valuation reflects the firm's confidence in Warby Parker's growth prospects and financial performance in the near future.
In other recent news, Warby Parker Inc. reported significant growth in its second quarter of 2024, with a 13.3% increase in net revenue to $188.2 million and a nearly 40% rise in adjusted EBITDA to $19.6 million. These positive results have led Warby Parker to raise its full-year guidance for both net revenue and adjusted EBITDA.
The eyewear company's full-year 2024 revenue is now projected to be between $757 million and $762 million, with an adjusted EBITDA forecasted at $72.5 million.
Stifel maintained a Hold rating on Warby Parker but increased the price target to $15.00, following the company's second-quarter performance. The eyewear company saw a year-over-year increase of 4.5% in active customer accounts and a significant rise of 8.8% in average revenue per customer. This growth was supported by a notable uptick in single-vision glasses sales.
In the same period, Warby Parker expanded to 88 markets, a 21% increase from the previous year, and boosted marketing spending by 23% year-over-year.
Despite these developments, Stifel suggests that the current pace of customer growth may not excite market watchers. Warby Parker's guidance for the second half of the year anticipates gross margins to remain roughly flat year-over-year.
InvestingPro Insights
Following the upgrade by JMP Securities, Warby Parker Inc. (NYSE:WRBY) appears to be on the radar of investors and analysts alike. With a positive outlook on its future performance, it's worth noting some key metrics and insights from InvestingPro that could further inform investment decisions. The company's market capitalization stands at $1.66 billion, indicating its significant presence in the eyewear market. Despite a negative P/E ratio of -33.15, reflecting its current lack of profitability, there is an expectation of net income growth this year, which could signal a turning point for the company.
InvestingPro data shows a robust revenue growth of 13.67% over the last twelve months as of Q2 2024, suggesting that the company is expanding its sales despite the challenging market conditions. Moreover, Warby Parker holds more cash than debt on its balance sheet, providing it with financial flexibility. This is complemented by the fact that its liquid assets exceed short-term obligations, further showcasing its ability to manage short-term financial commitments.
Two InvestingPro Tips that stand out for Warby Parker are the anticipation of profitability this year and the company's volatile stock price movements. These insights suggest that while there may be potential for growth, investors should be prepared for fluctuations in the stock's value. For those looking for a more comprehensive analysis, there are additional InvestingPro Tips available, which could offer deeper insights into Warby Parker's financial health and market potential.
The company's next earnings date is set for November 7, 2024, which will be a critical time for investors to watch for management commentary and performance updates. As the company navigates through its growth trajectory, these InvestingPro insights can serve as valuable tools for investors to stay informed and make well-rounded investment decisions.
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