Warby Parker Inc. Just Reported A Surprise Loss: Here's What Analysts Think Will Happen Next

Investors in Warby Parker Inc. (NYSE:WRBY) had a good week, as its shares rose 3.1% to close at US$16.41 following the release of its quarterly results. Things were not great overall, with a surprise (statutory) loss of US$0.30 per share on revenues of US$153m, even though the analysts had been expecting a profit. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Warby Parker

Taking into account the latest results, the consensus forecast from Warby Parker's nine analysts is for revenues of US$646.0m in 2022, which would reflect a decent 16% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.85 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$656.9m and earnings per share (EPS) of US$0.01 in 2022. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 40% to US$22.56, with the analysts signalling that growing losses would be a definite concern. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Warby Parker, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$15.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Warby Parker'shistorical trends, as the 22% annualised revenue growth to the end of 2022 is roughly in line with the 25% annual revenue growth over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 6.3% per year. So it's pretty clear that Warby Parker is forecast to grow substantially faster than its industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Warby Parker dropped from profits to a loss next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Warby Parker's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Warby Parker going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Warby Parker that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.