The Ratings Game: Goldman Sachs is upbeat about eyeglass retailer Warby Parker’s brick-and-mortar prospects
Goldman Sachs analysts are upbeat about Warby Parker Inc.’s store expansion in their initiation note for the eyeglass seller, rating Warby Parker shares a buy with a 12-month price target of $72, or 22% above their current level.
“We see Warby Parker’s brick-and-mortar rollout strategy as a key driver of
higher national brand awareness and a driver of total sales momentum,” the note said. “New stores offer holistic visioncare, have strong four-wall unit economics, and enable mix shifts to higher AOV [average order value] products.”
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Goldman cites data from Vision Council showing that 76% of adults use some form of vision correction.
“We view Warby Parker as a high-growth omnichannel brand with exposure to the structurally growing visioncare market.”
Cowen analysts are also optimistic about Warby Parker’s
future store locations, and says the company’s “transparent pricing” is an asset.
Moreover, analysts say Warby Parker is “growing profits with purpose as a public-benefit corporation with a global mission to increase accessibility to high-quality vision care,” making it the top of analysts’ ESG (environmental, social governance) list of ideas.
Cowen rates Warby Parker at outperform with a $66 price target.
Cowen estimates the U.S. eyewear market is worth $35 billion.
Evercore analysts rate Warby Parker stock at in line with a target price of $54.
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“We believe Warby Parker brings a differentiated value proposition to a very large
vision care market that is still in the early stages of online penetration, with a founder-led business, robust gross margins, a steady track record of product innovations and multiple growth drivers that could support multi-years of premium topline growth,” analysts wrote.
“That said, we believe at current valuation levels, the risk/reward setup is relatively balanced.”
Evercore, which says the vision care market is worth $40 billion, identifies a number of challenges facing Warby Parker, including a competitive landscape with other companies like Zenni Optical getting into the direct-to-consumer vision business, and a concentration in vision insurance among two insurers, VSP and EyeMed, who cover 44% of the U.S. population. A majority of eye exams (76%) and eyeglass frames (60%) go through those two providers.
Warby Parker shares were up 4.4% in Monday trading after the initiations, trading at about $59.43. Warby Parker stock debuted on Sept. 29, jumping 34% out of the gate. Warby Parker went public through a direct listing, with a reference price of $40.
The Renaissance IPO ETF
has gained 7.8% for the year to date while the S&P 500 index
is up 21.6% for the period.