Is Warby Parker stock a buy?

Good company, fully valued stock.

That’s the takeaway from Roth Capital analyst Matt Koranda, who launched coverage of Warby Parker (Warby Parker Stock Quote, Chart, News, Analysts, Financials NYSE:WRBY) February 24 with a “Neutral” rating and price target of $26.00.

The analyst says he likes what the company has done so far and its outlook for continued success.

“So why are we Neutral? Two reasons…,” the analyst wrote.

“(1) We view WRBY stock as fully-valued,” he argued. “Trading at ~28x 2025 consensus EBITDA, a 100% premium vs. consumer and optical peer median 14x, WRBY stock likely already reflects our higher-growth/margin expansion outlook. (2) We’d like to see better store efficiency metrics before endorsing a sustained brick-and-mortar expansion. Warby’s store efficiency has been weakening (omni-channel sales per store -17% in 2019-2024). Despite this, management is pushing heavily into a brick-and-mortar store build-out, with 158 units added since the pandemic (~60% of YE24 store base), and we expect rapid expansion to sustain, with another 90 locations in 2025/2026, and likely more beyond that, given a 900 unit long-term target. We recognize the importance of a physical presence, especially for eye exams. However, with shifting demographics (i.e. Millennials/Gen Z are comfortable buying online and aging into prime optical cohort), and a large potential capex outlay for stores (~$900k/store and >600 locations suggests another >$550mn to deploy), we’d prefer to see store metrics improve before endorsing the broader build-out.”

The analyst thinks WRBY will post EBITDA of $75.7-million on revenue of $773.5-million in fiscal 2024. He expects EBITDA of $103.2-million on a topline of $885.4-million in fiscal 2025.

“We view Warby as a success story from the digitally-native/DTC upstart era of the 2010s, and as an emerging and formidable player in the large/attractive optical category. We expect steady growth and margin expansion ahead, however, we believe this is factored into the stock at 28x 2025 consensus EBITDA. We’d also like to see store efficiency improve before endorsing the significant brick-and-mortar expansion in the coming years,” Koranda added.