WRBY: Margin Expansion And 2025 Profitability Progress Will Drive Renewed Bullish Conviction

Analysts have nudged their blended price target for Warby Parker modestly higher, from approximately $22.17 to $22.45 per share. Stronger margin and growth assumptions have offset recent target cuts tied to slowing revenue trends and heightened uncertainty around the pace of top line expansion.

Analyst Commentary

Street research following the latest quarterly update reflects a growing divide between optimism on Warby Parker's profitability trajectory and concern over the durability of its growth profile. Recent target cuts cluster in the high teens to high twenties, signaling that while the story remains attractive to some, the margin for execution error has narrowed.

Bullish Takeaways

Bullish analysts highlight stronger than expected adjusted EBITDA and reaffirmed full year profitability guidance as evidence that the company is gaining operating leverage even as revenue growth moderates.
They view the higher absolute targets in the mid to high twenties as justified by Warby Parker's differentiated brand, expanding store base, and a still underpenetrated category that can support mid teens growth over time if traffic normalizes.
Supportive views argue that the current pullback already prices in a slower near term top line, creating potential for multiple expansion if management demonstrates more consistent comp and customer acquisition trends.
Some see the ongoing focus on efficiency and margin discipline as a positive signal that management can protect valuation even in a softer discretionary spending environment.

Bearish Takeaways

Bearish analysts emphasize the late quarter slowdown in younger customer engagement and the expected persistence of softer demand into the next quarter, which raises questions about the company's ability to deliver sustained mid teens revenue growth.
They argue that the premium multiple is harder to defend if the business is transitioning from a high growth profile to a more moderate trajectory, compressing upside in valuation despite improving margins.
There is heightened concern that retail economics could face pressure if traffic and conversion do not rebound, particularly as store investments and fixed costs remain elevated.
Some caution that increased uncertainty around the growth algorithm could lengthen the timeline for any material re rating, keeping the stock range bound until Warby Parker produces several quarters of more consistent top line execution.

What's in the News

Warby Parker updated its full year 2025 guidance, projecting net revenue of $871 million to $874 million, which implies approximately 13% year over year growth (company guidance).

Valuation Changes

Fair Value: risen slightly from $22.17 to approximately $22.45 per share, reflecting modestly more constructive assumptions.
Discount Rate: increased marginally from about 8.44% to 8.56%, signaling a slightly higher required return on equity risk.
Revenue Growth: nudged higher from roughly 12.94% to 13.24%, indicating a small upgrade to long term top line expectations.
Net Profit Margin: improved from about 8.36% to 9.01%, pointing to better anticipated operating efficiency and profitability.
Future P/E: declined from approximately 34.8x to 32.5x, suggesting a modestly lower valuation multiple applied to forward earnings.

Strategic partnerships, retail expansion, and enhanced eye care services are driving customer growth, higher spending per customer, and improved margins.
Leveraging AI-driven wearable technology and digital engagement is expected to boost operational efficiency and open up new high-margin revenue opportunities.
Heavy investment in retail, unproven AI ventures, and intensifying competition threaten Warby Parker's growth, margins, and ability to differentiate as consumer preferences evolve.

Catalysts

About Warby Parker

Provides eyewear products in the United States and Canada.What are the underlying business or industry changes driving this perspective?

The partnership with Google to develop AI-powered intelligent eyewear positions Warby Parker to enter a substantially larger market, leveraging advancements in wearable technology and artificial intelligence to drive new, higher-margin revenue streams in the future.
Expansion of the retail footprint-including new shop-in-shops with Target and densification in underpenetrated suburban markets-supports continued growth in active customers and higher average revenue per customer, directly impacting top-line revenue and long-term market share.
Growing awareness of eye health, increasing recurring vision issues due to digital device usage, and industry tailwinds (such as higher demand for progressives and contacts) are boosting Warby Parker's addressable market and driving increases in both unit volume and average revenue per customer.
Scaling eye care services, including expanded insurance partnerships, eye exams, and retinal imaging, fosters recurring, higher-value customer relationships and supports growth in both revenue and margin by increasing customer lifetime value and penetration into higher-margin categories.
Adoption of proprietary AI-driven tools (such as Advisor) and the shift of resources from legacy programs (like home try-on) to more efficient, digital-first customer acquisition and engagement strategies is expected to enhance conversion, lower CAC, and improve operating margins over time.

Warby Parker Earnings and Revenue Growth

Warby Parker Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Warby Parker's revenue will grow by 14.8% annually over the next 3 years.
Analysts assume that profit margins will increase from -1.1% today to 6.9% in 3 years time.
Analysts expect earnings to reach $85.4 million (and earnings per share of $0.42) by about September 2028, up from $-9.2 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 49.1x on those 2028 earnings, up from -333.8x today. This future PE is greater than the current PE for the US Specialty Retail industry at 19.2x.
Analysts expect the number of shares outstanding to grow by 1.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.29%, as per the Simply Wall St company report.

Warby Parker Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Slowing e-commerce growth, as seen by low single-digit increases in the channel and the sunsetting of the home try-on program, could limit long-term topline expansion, especially as more competitors invest heavily in digital and omnichannel strategies-potentially resulting in slower revenue growth.
Aggressive retail store expansion and densification, while driving current revenue, exposes Warby Parker to higher fixed costs and operational complexity, which could lead to decreased per-store productivity and increased SG&A, eventually pressuring net margins if store growth outpaces market demand.
The announcement of a new, unproven AI eyewear partnership with Google entails significant execution risk, as success depends on both Warby Parker's ability to innovate beyond traditional eyewear and Google's ability to break through with wearable AI-failure could dilute focus, escalate R&D costs, and reduce earnings.
Increasing price competition and commoditization in direct-to-consumer eyewear-driven by established conglomerates, lower-cost rivals, and subscription/fast-fashion entrants-may erode Warby Parker's mid-tier price and value differentiation, putting sustained pressure on gross margin and future earnings.
Limited product diversification beyond eyewear and related services makes Warby Parker susceptible to shifts in consumer preferences, industry disruptions, or new vision correction technologies, potentially constraining long-term revenue opportunities and increasing the risk of prolonged earnings stagnation.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $26.231 for Warby Parker based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $20.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $85.4 million, and it would be trading on a PE ratio of 49.1x, assuming you use a discount rate of 8.3%.
Given the current share price of $25.26, the analyst price target of $26.23 is 3.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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