On Thursday, Stifel maintained a Hold rating on Warby Parker Inc. (NYSE:WRBY) but increased the price target to $15.00 from the previous $14.00. The adjustment followed Warby Parker's second-quarter performance, which exceeded expectations, supported by a rise in active customer accounts and average revenue per customer.
The eyewear company saw a year-over-year increase of 4.5% in active customer accounts in the second quarter, compared to a 3.2% increase in the first quarter of 2024. Unique customer growth also accelerated to 5.5% year-over-year from 4.5% in the previous quarter. Additionally, average revenue per customer saw a significant rise of 8.8%. A notable uptick in single-vision glasses sales contributed to both the revenue growth and an expansion in gross margin—only the second occurrence since the company's public debut.
Warby Parker's guidance for the second half of the year anticipates gross margins to remain roughly flat year-over-year. This projection includes expectations of moderating growth in glasses sales, which Stifel suggests may be a conservative estimate.
Despite the positive trends, Stifel remarks that the current pace of customer growth does not excite market watchers, especially considering the company's market expansion and increased marketing expenditures. Warby Parker expanded to 88 markets, a 21% increase from 73 markets in the same quarter of the previous year, and boosted marketing spending by 23% year-over-year.
The firm acknowledges the low expectations set for the second half of the fiscal year but indicates that the potential for upside is not enough to warrant a significant re-rating of the stock. With the growth trajectory being capital-intensive, Stifel finds the new 12-month price target of $15, which is based on 20 times the enterprise value to the forecasted adjusted EBITDA for the fiscal year 2025, to be appropriate for maintaining their Hold stance on Warby Parker shares.
In other recent news, Warby Parker Inc. reported substantial growth in its second quarter of 2024. The eyewear company saw a 13.3% increase in net revenue, reaching $188.2 million, and a nearly 40% rise in adjusted EBITDA to $19.6 million. These positive results led Warby Parker to elevate its full-year guidance for both net revenue and adjusted EBITDA.
Warby Parker'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. The 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.
InvestingPro Insights
Warby Parker Inc. (NYSE:WRBY) has been navigating a challenging market landscape, but certain metrics and analyst insights from InvestingPro could provide investors with a clearer picture of the company's financial health and prospects. With a market capitalization of approximately $1.67 billion and a significant year-over-year revenue growth of 13.12%, Warby Parker is showing signs of scaling its operations effectively. Despite not being profitable over the last twelve months, analysts are optimistic about the company's future, with net income expected to grow this year and two analysts revising their earnings upwards for the upcoming period.
An important highlight for potential investors is Warby Parker's balance sheet strength, as the company holds more cash than debt, which is a reassuring sign of financial stability. Additionally, liquid assets exceed short-term obligations, providing the company with a cushion to navigate short-term market fluctuations. One of the InvestingPro Tips suggests that while the stock has experienced significant volatility and taken a hit over the last week, the company is trading at a high Price/Book multiple of 5.28, which may indicate a premium valuation by the market.
For those interested in further insights, InvestingPro has additional tips on Warby Parker, providing a comprehensive analysis for investors looking to make informed decisions. With the next earnings date set for August 8, 2024, and an analyst fair value target of $17 compared to the InvestingPro fair value of $14.78, investors have valuable data points to consider. Warby Parker's strategic moves and financial performance will be closely watched as the company aims to turn a profit this year, as predicted by analysts.
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