Citi has downgraded Warby Parker (WRBY) from Neutral to Sell, citing concerns over the stock's valuation after a 50% rise in the past three months. Despite expecting a strong Q4 2024 performance with sales growth of 16.5% versus consensus of 15.6%, Citi believes the stock is overvalued at approximately 29x its F25 EV/EBITDA. The report highlights that while Warby Parker is on track to exceed its full-year 2024 topline guidance by 200 basis points, store sales volumes have not met expectations, and sales growth has lagged behind store expansion since 2021.
Citi has raised its DCF-based target price from $19 to $23, reflecting a valuation of ~24x F25 EBITDA. The report anticipates management will guide for 2025 revenue growth of 14-15% and an EBITDA margin of 11.0%, slightly above consensus. However, Citi expresses concern over the sustainability of Warby Parker's current store growth rate, given the decline in active customers per store since 2022. "We believe the risk/reward is unfavorable," Citi states, pointing to the rich valuation and ongoing challenges in customer growth metrics.
Warby Parker's current stock price is $25.60, down 4.76% from the previous close of $26.88.