Warby Parker Inc. (NYSE:WRBY) saw its price target increased by CFRA from $17.00 to $20.00, while the firm maintained a Buy rating on the stock. The upward revision reflects a positive assessment of the company's future financial performance, with a focus on the adjusted EBITDA for the year 2025.
The analyst from CFRA justified the new price target by applying a 24x multiple to Warby Parker's projected 2025 adjusted EBITDA of $88 million. This valuation corresponds to a 2.7x price to sales ratio. The adjustment in valuation to the year 2025 figures is based on a belief in a favorable performance environment, influenced by recent Federal Reserve rate cuts.
According to the analyst, the lower interest rates are anticipated to reduce the financial burden on consumers, which, combined with other factors such as decreasing gas prices, is expected to boost the demand for essential items like eyewear.
Warby Parker, known for catering to a higher-income customer base, is likely to benefit from an increase in average selling prices. Meanwhile, the company's affordable and innovative product range should continue to appeal to cost-conscious consumers.
CFRA also highlighted that Warby Parker's recent expansions in insurance partnerships are poised to gain momentum in 2025, potentially broadening the company's consumer base. With these partnerships in place, Warby Parker is predicted to encounter fewer obstacles in meeting its economic targets for new stores within the expected 20-month timeframe.
In other recent news, Warby Parker Inc. reported a 13.3% increase in net revenue to $188.2 million for the second quarter of 2024, along with a nearly 40% rise in adjusted EBITDA to $19.6 million. Consequently, the company has raised its full-year guidance, now projecting revenue to be between $757 million and $762 million, and adjusted EBITDA at $72.5 million.
Piper Sandler assumed coverage on Warby Parker with an Overweight rating, citing the company's accelerating growth in the eyewear market and potential for service segment expansion. JMP Securities also upgraded Warby Parker's stock from Market Perform to Market Outperform, setting a new price target of $20.
Stifel maintained a Hold rating on Warby Parker but increased the price target to $15.00, following the company's second-quarter performance. The company's strategy of extending its insurance offerings and investing in technology-driven vision care services has shown promising returns, particularly in the growth of its glasses business and active customer numbers.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Warby Parker's financial position and market performance. The company's market capitalization stands at $1.93 billion, with a revenue of $719.93 million for the last twelve months as of Q2 2024. Notably, Warby Parker has demonstrated strong revenue growth, with a 13.67% increase over the same period.
InvestingPro Tips highlight that Warby Parker holds more cash than debt on its balance sheet, indicating a solid financial foundation. This aligns with CFRA's optimistic outlook on the company's future performance. Additionally, analysts predict that Warby Parker will be profitable this year, which could further support the increased price target.
It's worth noting that Warby Parker's stock has shown significant volatility, with a 12.68% return over the last week and a 29.44% return over the past year. This volatility, combined with the company's high Price/Book multiple of 5.86, suggests that investors should carefully consider their risk tolerance when evaluating the stock.
For those interested in a deeper analysis, InvestingPro offers 7 additional tips for Warby Parker, providing a more comprehensive view of the company's financial health and market position.
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