A Look at Stock Market Newcomer By TipRanks

Consumer-direct eyewear specialist Warby Parker (WRBY) made a splash on its first day on the New York Stock Exchange.

The company saw a massive surge in its first morning trading on Wednesday. Before the end of the day, the stock was up over 30% from its initial asking price.

Let’s settle in and take a look at what might well be one of Wall Street’s newest titans. I find myself moderately bullish on Warby Parker, mainly because of what it did before it went public. (See Warby Parker stock charts on TipRanks)

Pre-IPO

Past performance is no guarantee of future performance. Pretty much any prospectus that has ever existed will make that clear. Ever-changing market conditions also mean that a downturn can happen at any time. Worse, that downturn may have little to do with the company itself.

For Warby Parker, however, past performance gives us something to work with.

Warby Parker made a name for itself on the strength of its basic operating proposition: inexpensive, attractive eyewear, with spectacular customer service.

Warby Parker’s origins go back to 2010, when Wharton School students noticed that getting eyewear was a pretty basic proposition. A few big names in eyewear would make huge quantities of glasses. The glasses were then sold in bulk to optical shops. That’s when Warby Parker shook things up.

Warby Parker allowed customers to have eyeglass frames mailed to them to try on at home. Then, once the customer found his or her choice, buy them from there. The company even backed up its product with free replacements if the lenses were scratched within the first year.

The company also added a social component to its work. The company donated a pair of glasses for every pair it sold. It also worked to train volunteers to give eye exams to communities that needed them. As a result, the company considers itself a public benefits corporation.

Concluding Views

It’s true that Warby Parker’s status as a public benefits corporation could have an impact on the bottom line. Its various public-focused initiatives like giving away free products don’t exactly help profits either.

However, it’s likely that Warby Parker’s public focus will pay off in a much more valuable coin: goodwill. The giveaway means every item represents about half the profit that it might have. It also means people remember the name.

Warby Parker is trying to make a name for itself doing what was previously the province of large-scale optical operations.

The huge run-up in its share price Wednesday demonstrates that there’s significant interest. Individual investors may want to wait for that initial furor to die down. When it does, a more reasonable price point could come with it.

Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.

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