After 14 years of ups and downs, Wall Street is ready to believe again that The RealReal Inc. just might be the next big thing.
Shares of the luxe resale pioneer shot up 38.1 percent to $15.48 on Tuesday on a stronger outlook for the year after the firm cruised past the market’s third-quarter estimates.
The boost left The RealReal with a market capitalization of $1.8 billion — the company’s strongest valuation since 2021.
Late Monday, after driving third-quarter revenues up 17 percent, the company forecast a top line of $687 million to $690 million for the full year, well above the $675 million analysts forecast. Gross merchandise volume is expected to top $2 billion.
After a buzzy stretch for resale while the broader market has been soft, chief executive officer Rati Levesque painted a picture of The RealReal as a company at the vanguard of a massive swing.
“We are changing the way people shop, making resale a primary option,” Levesque told analysts on a conference call. “Fifty-eight percent of shoppers prefer the secondary market outright and 47 percent of shoppers now consider resale value before buying something new. Resale is no longer reacting to the fashion industry but driving it.”
But The RealReal can only keep growing if it has the right secondhand goods flowing in to power the business.
Levesque has been focusing on supply through a “growth playbook” that has the company looking to become more efficient as well as more obsessive when it comes to providing sellers with good service.
Ike Boruchow, an analyst at Wells Fargo, said that’s the right play.
“As the story remains supply-focused, The RealReal has ensured the right tools are in place — with a focus on long-term sustainability,” Boruchow said in a note on clients. “This means bringing in a healthy/high-value supply flow-through with a well optimized marketing/sales team while tapping into the customer flywheel as they convert buyers to sellers.”
Boruchow has an overweight rating on the stock with a $15 price target.
But The RealReal still has to prove itself to some.
Jay Sole, an analyst at UBS, stayed neutral on the stock, but raised his price target to $14 from $10.50.
“Our view is The RealReal’s efforts to unlock supply and drive operational efficiency are working,” Sole said. “We expect these initiatives to continue driving sales and EBITDA growth.”
Now the company has to keep it up.
“We aren’t sure The RealReal can sustain double-digit top-line growth,” Sole said. “Sales trends are strong now, but we believe this could partly be due to macro factors. Consumers may be more willing than usual to sell their goods given the uncertain economic outlook. If macro normalizes, it could constrain The RealReal’s ability to maintain its current momentum.”
