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On Wednesday, Raymond (NSE:RYMD) James made adjustments to its outlook on Revolve Group (NYSE:RVLV), a fashion retailer known for its appeal to younger consumers. Analyst Rick Patel revised the company’s price target downward to $21 from the previous $25, while still maintaining an Outperform rating on the stock. According to InvestingPro data, the stock has experienced significant volatility, falling over 42% in the past six months, though it maintains a healthy gross profit margin of 52.5%.
Patel cited a deceleration in revenue and an updated guidance from the company as the primary reasons for the lowered estimates. Despite the reduction, Raymond James believes that Revolve’s long-term opportunities remain solid. These opportunities include the potential growth in owned brands, international expansion, unique marketing strategies to attract young customers, and forward (FWRD) initiatives. InvestingPro analysis shows the company maintains strong financial health, with a current ratio of 2.86 and more cash than debt on its balance sheet, positioning it well for these growth initiatives.
The analyst also pointed out that Revolve’s gross margin percentage could benefit from tailwinds associated with its owned brands and return rates, as well as efficiency improvements. Patel highlighted the company’s robust balance sheet and positive cash flow generation as key factors that would help it navigate challenges such as tariffs.
Even with the revised estimates, Raymond James views the valuation of Revolve’s shares as attractive. The stock’s after-market price of approximately $17 was considered appealing, trading at 14.5 times its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which is below the five-year average of 20 times.
The price target of $21 is based on an EV/EBITDA multiple of 20 times, aligning with the firm’s historical average. This revision reflects a cautious but still optimistic stance on Revolve’s financial prospects amid a period of slower growth and external economic pressures.
In other recent news, Revolve Group reported its Q1 2025 earnings, revealing a slight earnings per share (EPS) beat at $0.16, surpassing the forecast of $0.15. However, the company’s revenue fell short of expectations, coming in at $296.71 million compared to the anticipated $297.56 million. Despite the earnings beat, Revolve’s stock experienced a significant decline in aftermarket trading. The company has adjusted its gross margin guidance to 50-52% for 2025, citing tariff uncertainties as a primary concern. Revolve plans to continue its investment in AI and owned brands, with potential expansion into physical retail, including a new store in Los Angeles. The company also reported a 57% year-over-year increase in operating income and a 45% rise in adjusted EBITDA to $19 million. Analysts have not issued any recent upgrades or downgrades for Revolve Group, but the company remains focused on navigating current market conditions and mitigating risks associated with tariffs and consumer confidence.
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