Warby Parker Stock Forecast—What to Expect Amid Lofty Valuation

Warby Parker (WRBY) stock starts trading publicly on Sept. 29. The company makes and sells eyewear, with a product range that spans from prescription glasses to sunglasses. It also offers other vision-related services. Instead of a traditional IPO, the company chose to go public through a direct listing. What’s Warby Parker's stock forecast? Should you buy the stock?

In choosing the direct listing IPO alternative, Warby Parker is following in the footsteps of Amplitude (AMPL) and Coinbase (COIN). The other direct listing stocks in 2021 are Squarespace, ZipRecruiter, and Roblox. Amplitude stock surged on its first day of trading on Sept. 28.

Spotify, Palantir, and Slack also chose a direct listing over a conventional IPO. Slack stock has been delisted after Salesforce acquired the company. However, many of the recent direct listing stocks have recorded substantial gains since their debut. For example, Palantir stock carries lifetime gains of almost 170 percent.

The company was started in 2010 by Neil Blumenthal and Dave Gilboa. They still lead the company as co-CEOs. Warby Parker boasts the backing of several prominent institutional investors including T. Rowe Price, D1 Capital Partners, Tiger Global, Durable Capital, and General Catalyst.

Warby Parker started selling its products online and later expanded into physical retail. It operates more than 145 stores in the U.S. and Canada. The company serves more than 2 million active customers compared to 1.8 million at the end of 2020.

The company set a reference price of $40 for its stock for the public listing. That suggests a valuation of about $5 billion. Warby Parker was last valued at $3 billion in August 2020 following an investment round.

The company’s revenue increased to $393.7 million in 2020 from $370.5 million in 2019 and $273 million in 2018. In the first half of 2021, the revenue hit $270.5 million compared to $176.8 million in the same period last year.

The company broke even in 2019 but made a loss of $56 million in 2020. It made a loss of $7.3 million in the first half of 2021, although that narrowed from a loss of more than $10 million a year ago. Warby Parker’s losses are deliberate because the company is investing heavily in marketing and other areas to fuel rapid expansion.

The huge spike in Warby Parker’s valuation to about $5 billion from $3 billion a year ago has many investors interested in the company’s stock price outlook as it goes public. In April, Warby Parker stock traded at just under $25 in the private market. Therefore, the $40 reference price suggests 60 percent upside. Will the stock keep climbing?

Warby Parker stock might be volatile initially as investors debate the valuation. However, there's a chance that the stock will appreciate over the long term, especially considering the company’s enormous growth potential.

Warby Parker has only captured a tiny share of the available market opportunity, which is worth more than $100 billion. It’s expanding internationally, which should allow it to better take advantage of the market opportunity.

The robust revenue growth Warby Parker has recorded shows that the company’s business model is working. The company has been successful in building a loyal customer base, which continues to expand.

Warby Parker achieving breakeven in 2019, which shows that the company can be profitable once spending slows down. For now, the company expects to continue making losses as it funds growth.

However, a risk factor that investors should keep in mind is that Warby Parker is under an investigation by the Office for Civil Rights over a 2018 cyberattack. The probe could expose the company to fines or sanctions.