Warby Parker is rated at Hold by Stifel due to the near-term costs of growth

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Stifel initiated coverage of Warby Parker (NYSE:WRBY) with a Hold rating on a view the path to strong revenue growth for the online glasses retailer will be capital intensive in the near term.

Warby Parker (WRBY) is noted to bring a differentiated approach to comprehensive vision care and at just 13% brand awareness in the U.S. market, the brand is seen being early in development.

Analyst Jim Duffy: "Compelling digital economics and retail expansion opportunity suggest a long-runway for 20% or better growth and margin expansion. Growth is becoming more retail dependent, however, increasing capital intensity limiting cash conversion for the next 3-5 yrs. With open-ended growth potential and opportunity for margin leverage with scale, we see it appropriate to take a long-view on valuation but the capital intensity of the model keeps us guarded on multiple assumptions."

Duffy warned that WRBY has capital expenditures planned at a high-single digit percent of revenue to support growth, which could limit cash conversion for the next 3 to 5 years.

Wall Street ratings scorecard on Warby Parker (WRBY): 5 Buy-equivalent ratings, 4 Hold-equivalent ratings and no Sell-equivalent ratings.