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Investing.com - Raymond (NSE:RYMD) James raised its price target on Revolve Group (NYSE:RVLV) to $25.00 from $21.00 on Tuesday, while maintaining an Outperform rating on the fashion retailer’s stock. According to InvestingPro data, the stock is currently trading at attractive valuations with a PEG ratio of 0.28, despite falling 32% over the past six months.
The investment firm projects second-quarter results in line with consensus estimates but has updated its model to reflect "modestly less gross margin pressure from tariffs" compared to when Revolve reported first-quarter results, when China tariffs were at 145%. Raymond James now assumes China tariffs will be 30% and other geographies will be 20%. The company maintains a healthy gross margin of 52.4%, and InvestingPro analysis shows strong financial health with a current ratio of 2.66, indicating solid liquidity.
The firm estimates Revolve’s unmitigated annualized tariff headwind is now closer to 400 basis points, down from over 700 basis points previously estimated. Despite this improvement, Raymond James only modestly raised gross margin estimates due to slower quarter-over-quarter growth and an uptick in promotions observed in their checks.
Raymond James expects Revolve to continue "growing robustly this year despite headwinds," with second-quarter revenue projected to increase 5% year-over-year, in line with Street estimates. The company had indicated in May that April trends were up mid-single digits percentage versus double-digit percentage growth in the prior three quarters.
The investment firm believes Revolve’s growth drivers remain intact, including "differentiated marketing/events, international, beauty, men’s, retail," along with margin improvement opportunities from "lowering the return rate, Owned Brands, efficiency, and leverage."
In other recent news, Revolve Group has reported its Q1 2025 earnings, with earnings per share slightly surpassing expectations at $0.16 compared to the forecast of $0.15. However, the company’s revenue fell short of predictions, coming in at $296.71 million against the anticipated $297.56 million. Following these mixed financial results, KeyBanc Capital Markets adjusted its outlook on Revolve Group, lowering the price target from $37.00 to $25.00 while maintaining an Overweight rating. KeyBanc analyst Ashley Owens noted challenges such as tariffs and macroeconomic uncertainty impacting the company’s future performance but also highlighted positive growth in active customers and order volume.
Meanwhile, Raymond James also revised its price target for Revolve Group, reducing it from $25 to $21, yet keeping an Outperform rating. Analyst Rick Patel pointed to a slowdown in revenue and updated company guidance as reasons for the adjustment. Despite these changes, Raymond James remains optimistic about Revolve’s long-term growth potential, citing opportunities in owned brands, international expansion, and unique marketing strategies. These recent developments provide a comprehensive look at the current situation facing Revolve Group.
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