Expert eyewear designer, Warby Parker (NYSE: WRBY) is now worth around $6.8 billion after its successful direct listing on Wednesday. The company finished the trading day with a valuation that was roughly twice that of what it was given in its private funding round last year. Is the company a good investment though? Let’s find out.
Warby Parker’s blockbuster start to public life
Warby decided to take the less-traveled road by undertaking a direct listing, instead of a traditional IPO. Shares finished up the day on Wednesday at $54.49, which was 36% above its reference price for its stock market debut.
Warby’s original business model consisted of selling glasses online by sending clients out a few pairs for them to try on so they could then send back those designs that they did not like for free.
After its debut on the New York Stock Exchange, the company is valued at over $6 billion, making it one of the strongest recently-listed stocks in the direct-to-consumer market.
Should I invest in Warby Parker?
As many people buy glasses at the same location where they get their eyes tested, Warby misses out on a large customer base that can’t visit its local test centers. Instead, the company relies on its affordable prices, stylish designs, and donation program to attract customers online.
With two million active customers, Warby was able to bring in revenue of $394 million in 2020, which was a 6% increase from the prior year. However, it still has only captured 1% of the available market meaning it has huge potential to attract more clients. To do this, Warby is opening hundreds of locations in the U.S. where users can get their eyes tested, try on frames, and buy them all in one shop.
Another idea that the firm had was to allow people to try on glasses virtually in the app by sending in a picture of themselves. Now customers will be able to also renew their prescriptions on their app too.
A risk of investing in this company is that it does have a lot of competitors who have more locations than it. These rivals include retail giant Walmart and optometric service network Vision Source. Having said that, Warby is a strong competitor in the space and still has a large addressable market to reach.
It really would not be like us to not mention the dangers of investing in a newly-listed company though. To limit risk, MyWallSt always recommends investors wait until it has produced at least two earnings reports as a publicly-traded company before they invest in it.
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Financial Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.