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Wolfe Research analysts initiated coverage of Warby Parker (NYSE:WRBY), Wayfair (NYSE:W), Rent the Runway (NASDAQ:RENT), and Kaiser Aluminum (NASDAQ:KALU) in separate research notes on Thursday.
The analysts started Warby Parker with an Outperform rating and $20 price target, stating the firm sees a multi-year retail unit growth opportunity in a fragmented, defensive, non-discretionary end market.
“Vision care offerings should drive same-store upside,” writes the analysts. “The $44B US optical care market has shown a steady +4-5% CAGR and should benefit from an aging population moving forward. We favor non-discretionary categories given macro uncertainty, and optical retail has historically been recession-resistant (optical PCE was up +1% in 2008). We also note Warby has no debt and a committed — but undrawn — credit facility”
They initiated Wayfair with a Peer Perform rating, stating that although it is “one of the largest online sellers of furniture and home furnishings, which is a very large and growing TAM supporting a +21% five-year revenue CAGR through year-end 2022e,” the firm’s rating reflects “near-term risks to discretionary spending and questions over recent market share loss.”
Rent the Runway was also started at Peer Perform. “We were encouraged by last week’s earnings results, which showed stabilization in subscriber count and progress on improved profitability,” the analysts said in his note. “Longer-term, we think Rent the Runway offers a unique value prop for both consumers and brands, but we have some concern about the implications of subscriber sensitivity to price, and we worry about a track record of volatile customer churn ahead of an uncertain macro backdrop.”
Finally, Kaiser Aluminum was given a Peer Perform rating, based on the assumption that “EBITDA mgns rebound nearer to historical levels after recent disappointments.” The analysts added that the stock’s premium multiple to peers “is somewhat justified due to no Europe exposure and a solid track record,” but it limits the upside, in Wolfe Research’s view.
