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The Ratings Game: Goldman Sachs is upbeat about eyeglass retailer Warby Parker’s brick-and-mortar prospects

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Goldman Sachs analysts are upbeat about Warby Parker Inc.’s store expansion in their initiation note for the eyeglass seller, rating Warby Parker shares a buy with a 12-month price target of $72, or 22% above their current level.

“We see Warby Parker’s brick-and-mortar rollout strategy as a key driver of
higher national brand awareness and a driver of total sales momentum,” the note said. “New stores offer holistic visioncare, have strong four-wall unit economics, and enable mix shifts to higher AOV [average order value] products.”

See: Warby Parker IPO: 5 things to know about the affordable-eyeglass maker now that it has gone public

Goldman cites data from Vision Council showing that 76% of adults use some form of vision correction.

“We view Warby Parker as a high-growth omnichannel brand with exposure to the structurally growing visioncare market.”

Cowen analysts are also optimistic about Warby Parker’s
WRBY,
+3.50%

future store locations, and says the company’s “transparent pricing” is an asset.

Moreover, analysts say Warby Parker is “growing profits with purpose as a public-benefit corporation with a global mission to increase accessibility to high-quality vision care,” making it the top of analysts’ ESG (environmental, social governance) list of ideas.

Cowen rates Warby Parker at outperform with a $66 price target.

Cowen estimates the U.S. eyewear market is worth $35 billion.

Evercore analysts rate Warby Parker stock at in line with a target price of $54.

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“We believe Warby Parker brings a differentiated value proposition to a very large
vision care market that is still in the early stages of online penetration, with a founder-led business, robust gross margins, a steady track record of product innovations and multiple growth drivers that could support multi-years of premium topline growth,” analysts wrote.

“That said, we believe at current valuation levels, the risk/reward setup is relatively balanced.”

Evercore, which says the vision care market is worth $40 billion, identifies a number of challenges facing Warby Parker, including a competitive landscape with other companies like Zenni Optical getting into the direct-to-consumer vision business, and a concentration in vision insurance among two insurers, VSP and EyeMed, who cover 44% of the U.S. population. A majority of eye exams (76%) and eyeglass frames (60%) go through those two providers.

Warby Parker shares were up 4.4% in Monday trading after the initiations, trading at about $59.43. Warby Parker stock debuted on Sept. 29, jumping 34% out of the gate. Warby Parker went public through a direct listing, with a reference price of $40.

The Renaissance IPO ETF
IPO,
+1.90%

has gained 7.8% for the year to date while the S&P 500 index
SPX,
+0.45%

is up 21.6% for the period.

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