By Teresa Rivas

National Vision Holdings has already soared more than 80% this year. One of its largest shareholders says it can still be "a total rocket ship."

PLP Funds founder and Chief Investment Officer Jonathan Lennon highlighted the eyewear retailer company at the Sohn Conference in New York Wednesday. He argued that investors can get some three times their money over time.

That is for three reasons. The first is that while the pandemic upended the longstanding pattern of Americans getting new glasses every two to three years, that cycle is slowly but surely reasserting itself, he said. That should bring higher and more predictable revenue.

In addition, Lennon argued that the management team is making a smart move by targeting higher-income consumers who are more likely to have insurance. Those people currently only account for some 40% of its business.

The average selling price for glasses from National Vision is $95. The fact that it is often the lowest-cost provider provides it a lot of protection for during harder times, as evidenced in 2009, when it grew 17.5%, compared with the industry average of 2.4%. That gives Lennon confidence about the outlook now.

The low price of its glasses also combines well with National Vision's focus on higher-income consumers. Insurers will typically cover glasses at around $155, so it should be able to raise prices to closer to that level without hurting those people financially. Demand wouldn't take a hit, but margins would improve.

His financial model calls for earnings before interest, taxes, depreciation, and amortization to be some 80% above current consensus estimates, leading him to think that the stock could at least double in a year, and continue to grow from there.

Lennon is also encouraged by the fact that activist investor Engine Capital has already gained seats on the company's board. That has led the company to establish a cost-cutting committee, and its new chief financial officer seems to be spearheading similarly promising efforts, he said.

Then there are tariffs: While no one is deeply worried about them today, "one tweet and they will" be concerned again, Lennon noted. Less than 10% of National Vision's costs would be subject to tariffs, while competitors' levels are much higher, he said.

In short, it is getting easier to see the bull case for National Vision.

Write to Teresa Rivas at teresa.rivas@barrons.com

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May 14, 2025 15:44 ET (19:44 GMT)

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