Here’s what potential investors need to know about Warby Parker
Eclothing maker Warby parker (NYSE: WRBY) has only been listed on the stock market for a few months. The company recently reported robust third quarter revenue growth, but is still not profitable. In this segment of Backstage Pass, registered on November, 1st, Fool contributors Toby Bordelon, Jose Najarro and Danny Vena discuss the new open society.
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Toby Bordelon: Here you see these are the financial highlights. They have not yet declared as a public company. They made no report. This is exactly what they have been doing in recent years. You see the revenues increase. Gross margins have been around the 60% mark for three years. They are increasing their number of stores. They are expanding their customer base.
It looks really good in terms of growth. I like what I see. The only thing I’ll say is there’s the market cap, I think, what’s the market cap, $ 6 billion, I think, is their current market cap. It’s a bit pricey, maybe, a bit up there, but I still think it’s definitely worth checking out. I love this business.
JosÃ© Najarro: Toby, I have a quick question for you. We all know that eyeglass heads come in different sizes. When you order online, do you know what process they are going through to measure? Do they give you similar instructions on how to measure what your glasses should be or how it is done?
Toby Bordelon: They do, but it’s also interesting, if you order online, they’ll send you five pairs for free to try. You can try on a range of sizes. If you want to do this you can also do it multiple times but they say it’s small, medium, big. You can get a few sizes or a few styles. You can try them on before ordering. They too, what’s new, one of the things with glasses is that it’s not just the frame, you have to measure the pupillary distance, which is the distance between your pupils, so that they can get the center of the lens correctly.
You just have to go to a store to do it or go to your optometrist and say, âPlease tell me what mine isâ. And of course, they would know that you are going to buy them online, and there may be some hesitation there. Now, you can actually use an online tool with a camera, smartphone, or PC, and just use a credit card, and they can get that pretty accurate.
Haven’t done it yet, but I’ll probably do it next time as there isn’t a store near me, and I don’t think I’ll be traveling anytime soon to approach one. But they get better as technology increases. They also have an online tool where you can take a photo of your face and paste multiple frames on it. You can see what you would look like. There are a lot of different ways to go about it.
JosÃ© Najarro: You sort of answered the second question I was going to ask. I was hoping this would be a place where they would use technology to improve the way they capture metrics, especially with the future of, like, who knows in the future, maybe augmented reality where people are using the sizes of, like, you can use your camera to measure things. It’s pretty good to see that this company is breaking new ground in one way or another in trying to enter this measurement market.
Toby Bordelon: Yes. They are certainly more and more on the road there. They are fine. With IPOs you always have questions about finances, you want to see a financial report. As a public company, we do not yet have this.
I’m going to take a very close look at the first two to see if the reality holds up after the IPO, which is still a concern for some of these companies. But so far I like what I see, and after using the product I’m kind of drawn to this one. Sometimes I need to temper my enthusiasm a bit before I embark on a business like this.
Danny Vena: This is the one I’ve been looking at since doing a little article for the Trailblazers IPO service. One of the things that I personally monitor is this: We know that every company in the ecommerce industry has received a boost during the pandemic. We know these levels of growth have come back to reality. What I want to see is what a more normalized level of growth is for them before I invest my money.
Toby Bordelon: I think it’s right. You see in terms of income, you see their income as if they had increased a lot from 2018 to 2019 and then the growth was not as high in 2020 which could be linked to a pandemic actually. They could be, remember one thing you couldn’t do as much during the pandemic was to go to the doctor. They wouldn’t let you in unless it was an emergency, especially an ophthalmologist. You can see how at first there would have been some concern. I don’t know if I want to be in front of you looking you in the eye. I think in 2020 what it appears to be is that a lot of people just haven’t bought that many glasses.
They stayed with what they had until they could return to the doctor later in the year and get an appointment. You might see some growth coming in and going out, 2021 maybe that will catch up a bit.
But yeah, like you said, we have to see some normalization, but the normalization after the pandemic and the normalization of the fact that they’re now a public enterprise, see how these things play together.
Danny Vena: Law. Well, thanks for that. I know Warby Parker is a business that I watch and actually here in San Diego I’ve seen a lot more Warby Parker TV commercials. They show how they make the frames and things and try to get people to contact them that way. This is definitely the one I’m looking at.
Danny Vena has no position in the stocks mentioned. Jose Najarro has no position in the mentioned stocks. Rachel Warren has no position in the stocks mentioned. Toby Bordelon has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.