Citi cuts Warby Parker stock rating, raises price target to $23

Published 05/02/2025, 11:50
Citi cuts Warby Parker stock rating, raises price target to $23

On Wednesday, Citi analysts downgraded Warby Parker Inc. (NYSE:WRBY) stock from Neutral to Sell, despite raising the company’s price target from $19.00 to $23.00. The downgrade comes amid expectations of a strong fourth quarter for fiscal year 2024, with sales projected to increase by 16.5%, surpassing the consensus estimate of 15.6% and the company’s own guidance of 14-16%. According to InvestingPro data, the stock has already delivered an impressive 102.87% return over the past year, with current analysis indicating the stock is trading above its Fair Value.

The analysts noted that Warby Parker’s stock has surged by 50% over the past three months, reaching a level they consider overvalued. While acknowledging the company’s better-than-expected performance in fiscal 2024, including an increase in active customers, they expressed concerns about the future. The analysts pointed out that although Warby Parker is likely to exceed its original fiscal 2024 revenue guidance by 200 basis points, the sales volumes in stores have been lower than initially planned. InvestingPro data shows the company maintains a healthy gross profit margin of 55.32% and strong liquidity with a current ratio of 2.47, though profitability remains a challenge. For deeper insights into Warby Parker’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

The report highlighted that since 2021, sales growth has significantly lagged behind store growth, as evidenced by a decline in customers per store since 2022. These issues, coupled with what Citi analysts describe as a "rich valuation" of approximately 29 times their fiscal 2025 enterprise value to EBITDA estimate, led them to conclude that the risk/reward profile for Warby Parker’s stock is currently unfavorable. InvestingPro analysis reveals revenue growth of 13.47% in the last twelve months, with 4 analysts recently revising their earnings estimates upward for the upcoming period, suggesting potential optimism despite valuation concerns.

Citi’s analysis indicates a cautious outlook for Warby Parker, suggesting that while the company may continue to improve in some areas, the overall financial metrics and market expectations present potential challenges. The new price target of $23.00 reflects an increase from the previous target but is accompanied by a recommendation to sell, based on the analysts’ assessment of the company’s valuation and sales dynamics.

In other recent news, Warby Parker has been the subject of several analyst adjustments and has reported robust growth in its third-quarter earnings. Evercore ISI downgraded the company’s stock rating from Outperform to In Line, citing a reassessment of Warby Parker’s risk-reward outlook at its current valuation. Meanwhile, Loop Capital Markets increased the price target for Warby Parker based on improved demand trends, while maintaining a Hold rating. Baird also maintained an Outperform rating and raised the company’s price target, emphasizing Warby Parker’s potential for continued market share growth.

On the earnings front, Warby Parker reported a significant year-over-year increase in net revenue, reaching $192.4 million, a 13.3% growth compared to the previous year. This performance led to an upward revision of the company’s full-year revenue growth guidance to 14-15% and a target for approximately $73 million in adjusted EBITDA. The company’s strategic expansion in physical stores and enhancements in its e-commerce platform were key drivers of this growth.

These developments reflect recent trends in Warby Parker’s business performance and market valuation. It’s important for investors to note that these changes are based on the company’s latest financial results and the assessments of Evercore ISI, Loop Capital Markets, and Baird.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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