On Tuesday, Citi maintained its Neutral stance on Warby Parker Inc. (NYSE:WRBY), keeping its price target steady at $15.00. The firm anticipates that the eyewear company will surpass market and management expectations in its third-quarter 2024 sales, projecting a growth of 13%, which is higher than the consensus estimate of 12% and the company's own guidance of 11-12%.
Warby Parker is also expected to report a third-quarter EBITDA margin of 9.7%, compared to the consensus of 9.0% and company guidance at the same level. Despite these positive projections, the analyst pointed out that the recent share price increase of 23% since the second-quarter earnings suggests that the market has already factored in the potential outperformance.
The analyst further expects Warby Parker to update its full-year 2024 guidance, potentially increasing its sales forecast to a range of $760-765 million from the current $757-762 million. This update would indicate a sales growth of 13.5-14.2%, with an EBITDA margin expectation of 9.8%, compared to the previously guided 9.5%.
However, concerns were noted regarding Warby Parker's store sales volumes, which are reportedly lower than initially planned. Additionally, since 2021, sales growth has not kept pace with the expansion in store numbers. Coupled with what is deemed a rich valuation of approximately 19 times the forward year 2025 enterprise value to EBITDA, the analyst remains neutral on the stock.
In other recent news, Warby Parker Inc. has disclosed board changes, with Gabrielle Sulzberger stepping down and Teresa Briggs transitioning to a Class III director.
Goldman Sachs upgraded Warby Parker's stock from Neutral to Buy, citing the scaling of covered lives through recent insurance partnerships and strengthening in the optical industry. Other firms, including CFRA, Piper Sandler, and JMP Securities, also adjusted their ratings and price targets for Warby Parker, indicating a positive outlook on the company's future performance.
Warby Parker's growth has been further supported by increased sales of single-vision glasses and a 23% year-over-year boost in marketing spending. The company's partnership with Versant Health is expected to provide access to 34 million insured lives, broadening its consumer base.
These recent developments reflect Warby Parker's ongoing growth and market expansion, with the company increasing its presence to 88 markets, a 21% increase from the previous year.
InvestingPro Insights
Recent InvestingPro data provides additional context to Citi's analysis of Warby Parker (NYSE:WRBY). The company's revenue growth of 13.67% over the last twelve months aligns closely with Citi's projected 13% growth for Q3 2024, suggesting consistent performance. This growth is particularly noteworthy given that Warby Parker is not currently profitable, with a negative P/E ratio of -46.83.
InvestingPro Tips highlight that Warby Parker holds more cash than debt on its balance sheet and has liquid assets exceeding short-term obligations. These factors could provide the company with financial flexibility as it navigates its growth strategy and store expansion plans.
The stock's volatility and large price uptick over the last six months, as noted by InvestingPro Tips, correlate with Citi's observation of the recent 23% share price increase. This volatility underscores the importance of careful analysis for potential investors.
For those seeking a deeper understanding of Warby Parker's financial position and market performance, InvestingPro offers 7 additional tips, providing a more comprehensive view of the company's prospects.
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