Stifel raises Warby Parker price target to $25, maintains Hold rating

On Friday, Stifel analysts increased their price target on Warby Parker Inc. (NYSE:WRBY) shares to $25 from the previous $22, while keeping a Hold rating on the stock. Currently trading at $24.62 with a market capitalization of $2.93 billion, the company has shown strong momentum with a 90% return over the past year. The adjustment follows Warby Parker’s announcement of a 17.8% year-over-year increase in fourth-quarter 2024 revenue, which amounted to $190.6 million. This performance surpassed Stifel’s projection of $185.7 million and the consensus estimate of $187.6 million. The company’s adjusted EBITDA for the quarter was $13.8 million, positioning it between Stifel’s estimate of $13.6 million and the Street’s expectation of $14.1 million.

Warby Parker also provided a stronger revenue outlook for fiscal year 2025, anticipating revenues between $878 million and $893 million, representing a 14% to 16% growth year-over-year. According to InvestingPro data, the company has maintained solid revenue growth of 15.16% over the last twelve months, though current valuation metrics suggest the stock is trading above its Fair Value. This guidance exceeds Stifel’s forecast of $857 million and the Street’s prediction of $872 million. However, the forecasted adjusted EBITDA of $97 million at the midpoint is only slightly higher than the prior consensus of $96.2 million, compared to Stifel’s earlier estimate of $88.1 million.

The company’s strategy includes a new partnership with Target (NYSE:TGT), which entails testing five new shop-in-shops, offering a promising new channel for attracting customers. InvestingPro analysis reveals strong financial health indicators, with a current ratio of 2.5 and more cash than debt on its balance sheet, suggesting ample resources to support expansion plans. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report, available for over 1,400 US stocks. Warby Parker’s revenue growth is anticipated to be driven primarily by the opening of new stores, with a 16% increase in units year-over-year, and to a lesser extent, by e-commerce growth, which is expected to see a mid-single-digit percentage increase year-over-year.

Stifel’s analysts find the company’s execution encouraging and have subsequently raised their estimates. However, they also note that valuation concerns persist, citing a premium multiple and the capital-intensive nature of the company’s projected growth. This observation aligns with InvestingPro’s analysis, showing an elevated EV/EBITDA multiple of 188.38x. The price target of $25 is based on a 25.0x enterprise value to EBITDA multiple on Stifel’s adjusted EBITDA estimate of $121 million for fiscal year 2026.

In other recent news, Warby Parker Inc. reported its fourth-quarter 2024 earnings, revealing significant revenue growth of 17.8% year-over-year, reaching $190.6 million, which surpassed analyst expectations of $186.76 million. Despite this revenue success, the company missed its earnings per share (EPS) forecast, reporting an EPS of -$0.06 compared to the expected $0.03. Warby Parker also announced plans to expand its physical presence by opening 45 new stores in 2025, including five shop-in-shops within Target stores, as part of a new partnership aimed at increasing its active customer base.

Analysts have reacted to these developments with mixed adjustments to their price targets for Warby Parker. UBS raised its price target to $23 while maintaining a Neutral rating, citing growth in eCommerce sales and an expanding customer base. JMP Securities increased its price target to $30 and maintained a Market Outperform rating, noting Warby Parker’s strong quarterly performance and strategic initiatives. Evercore ISI also raised its price target to $24, maintaining an In Line rating, and highlighted Warby Parker’s growth in glasses sales and strategic marketing investments.

The company has provided guidance for 2025, projecting revenue growth between 14% and 16% and an adjusted EBITDA of $97 million. Analysts at JMP Securities anticipate continued growth in active customer numbers and revenue per customer, with expectations of expanding profit margins by 100-200 basis points. Warby Parker’s strategic focus on expanding both its physical and digital presence, along with its recent partnership with Target, suggests a commitment to capturing more market share despite facing broader industry challenges.

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