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Is Warby Parker’s recent IPO a buy?

There has been a record number of IPOs so far in 2021, well beyond what you can imagine: a total of 800 IPOs at the time of this writing. That’s almost double the 2020 figure of 480, which was itself a record above the total of 397 in 2000.

There are many factors that could influence this IPO craze. Anyway, it opens up a lot of opportunities for investors. At the same time, there may only be a handful of new stocks in the market that make great investments, making it all the harder to figure out where your money is worth investing.

One of the most famous companies to hit the market this year is the eyewear maker Warby Parker (NYSE: WRBY)which only went public three weeks ago. The stock initially fell but has since rebounded. Is it just general market volatility? And is that a buying opportunity?

Image source: Getty Images.

A better buying experience

Warby Parker runs on a simple but compelling model. Founders Neil Blumenthal and Dave Gilboa didn’t understand why designer glasses were so expensive and thought they could deliver a quality pair for a lot less money straight from the manufacturer. That’s how Warby Parker was born in 2010, and it was a pretty instant hit.

Revenue in 2020 was $ 487 million, an impressive 33% year-over-year increase considering it was during the pandemic. His digital-first  -proach was a key success factor last year when people stayed home, and that was especially noteworthy because people weren’t being spent on extras like trendy glasses or unnecessary eye exams. It serves 55 markets and operates 145 physical stores.

It crosses the boundaries of traditional eyewear retail in several ways. The company offers free home trials, which means customers are sent a collection to try and they can send back those they don’t want as well as those they want to prep with a recipe. It also has virtual try-on technology on the website.

Warby Parker has more than 2 million active customers and a Net Promoter Score (NPS) of 83, which indicates customer satisfaction in an industry with an average NPS of 30. Plus, it has a customer retention rate of almost 100% after 48 months.

The company also has a socially conscious component with its Get a Pair, Give a Pair program. It has given 8 million couples to people in need since its inception and says that this has resulted in $ 1 billion in income for those people.

Growth opportunities

The company says there is a $ 140 billion global eyewear market, including $ 35 billion in the US, where 200 million Americans need some type of vision correction. And that number is growing at a projected average annual rate of 9.2%, giving Warby Parker a steady opportunity to grow its business. It also cites the rise of telemedicine and e-commerce as trends that should drive sales.

As for his own growth initiatives, there are several. The company is expanding its retail presence, aiming to enter international markets, improving its technical and digital infrastructure, improving product design and strengthening its eyesight options.

To me, it looks like the company has a robust model that is generating healthy growth and a visionary mindset, both signs of a good investment.

Will the stock continue to rise?

Warby Parker stock was initially down but is now trending up, beating its IPO price at the time of publication. I think there is a lot of potential here with a great market opportunity, increasing sales and an innovative  -proach. Management has shown that they can think outside the box and do things better, and I think we can expect a lot from Warby Parker.

There are a few caveats here. First, selling glasses, even in a better form, isn’t that different from other glasses salespeople. I would like Warby Parker to demonstrate more lateral thinking. Second, the company continues to post losses. I’ll see how it fares in the first quarter as a public company. However, investors should keep this stock on their watchlist.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, h -pier, and richer.

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