Warby Parker stock price crashes to key support: buy the dip?

Warby Parker (WRBY) stock price has suffered a harsh reversal as investors assess its tariff risks and the recently announced deal with Target. WRBY initially soared to a high of $28.70 earlier this year, and has erased most of those gains after falling by 40% to the current $17.8. It has retreated to the lowest level since November 6 last year. So, what next for WRBY shares?

Warby Parker stock has crashed after Target partnership

The biggest Warby Parker news of this year was its partnership with Target. This deal will create Warby Parker at Target, allowing the firm to sell its glasses in select Target stores in the US. It is part of Target’s strategy to grow its optical business nationwide. 

The deal is a win-win situation for the two companies as Warby Parker aims to grow its retail footprint in the country. Warby Parker now has 269 stores in the US, up from just 20 in 2015. 

Meanwhile, the WRBY stock has crashed as investors assess the impact of tariffs on its business. Most parts of its business will be impacted by Donald Trump’s tariffs, which apply on most imported goods from countries like China. 

Warby Parker imports some of its inputs from China and Italy, meaning that it is seeing higher costs. At the same time, the company could be affected by falling consumer confidence as many of them remain concerned about soaring inflation. In such situations, many consumers avoid buying products deemed as luxury. 

However, Warby Parker may benefit from the trend as it may attract customers from other luxury brands. That’s because WRBY sells most of its glasses for just $95, with its most expensive ones going for less than $200.

Read more: Warby Parker: Is it a better stock than EssilorLuxottica?

WRBY business is doing well

The most recent financial results showed that Warby Parker’s business was doing well even as consumer confidence retreated. Its annual revenue rose by 15.2% to $771 million, higher than analysts expected. 

The gross margins jumped to 55.3%, helped by the growth of its glasses segment. Glasses offer higher margins than other parts. It also experienced lower shipping costs. 

Warby Parker improved its bottom line as the net loss improved to $20.4 million. Its quarterly revenue jumped to $190 million, while the net loss narrowed to $6.9 million.

The company anticipates that its business will continue doing well this year. Net revenue will grow by between 14% and 16% to between $878 million and $893 million. It hopes to open 45 new stores this year.

Most importantly, the company is expected to turn a profit this year. The average annual earnings per share estimate is 34 cents followed by 47 cents next year. 

The average Warby Parker stock price forecast is $27.35, up from the current $17.82. Most analysts cite its growing market share in the US and its ongoing partnership with Target. 

Warby Parker stock price analysis

The daily chart shows that the WRBY share price peaked at $28.70 earlier this year and moved to a low of $17.8. It has dropped to the lowest level since November 5. This is a notable level since it was the highest swing on June 2, a sign that it has formed a break-and-retest pattern.

WRBY stock has moved below the 50-day and 200-day Exponential Moving Averages (EMA). The MACD and the Relative Strength Index (RSI) have continued falling, with the RSI crashing to the oversold level of 23. 

Therefore, there is a likelihood that the Warby Parker stock price will bounce back later this year. If this happens, the next point to watch will be the 50-day moving average at $23.3, which is about 15% above the current level.