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On Tuesday, BTIG analyst Marvin Fong updated The RealReal Inc. (NASDAQ: NASDAQ:REAL) price target, raising it to $9.00 from the previous $6.75. The firm maintained a Buy rating on the luxury consignment company’s stock. Fong’s decision to increase the price target was influenced by The RealReal’s gross merchandise volume (GMV) trends, which surpassed expectations. Although revenue and Adjusted EBITDA were reported to be in line with forecasts, Fong emphasized the significance of GMV as a key performance indicator (KPI). The company, currently valued at $881 million, has shown impressive momentum with a 228% price return over the past six months, despite showing an EBITDA loss of $31.8 million in the last twelve months. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.
The analyst expressed optimism about The RealReal’s future, citing the potential for the company to exceed its fiscal year 2025 EBITDA guidance. This outlook is based on the assumption that The RealReal could achieve an EBITDA flow-through rate of approximately 30%. Fong believes that the company has the capability to reach incremental margins of 40% or higher, considering its cost structure is balanced between fixed and variable costs. InvestingPro data reveals the company maintains an impressive gross profit margin of 74.4%, though it currently faces challenges with debt payments. Get access to 10+ additional ProTips and comprehensive financial metrics with InvestingPro’s detailed research report.
Additionally, Fong pointed out an opportunity for The RealReal to benefit from rising tariffs, suggesting that increased primary market prices could also bolster the secondary market. This scenario was described as a "free call option" for the company.
The new $9 price target is grounded on a valuation of 3 times the company’s estimated 2026 enterprise value to gross profit ratio. This valuation is consistent with the median for the e-commerce sector. Fong’s outlook is supported by the belief that resale is among the fastest-growing sectors in e-commerce and that The RealReal holds the highest market share in this space. These factors, according to the analyst, justify a valuation multiple that aligns with the e-commerce sector’s median.
In other recent news, RealReal Inc. reported preliminary fourth-quarter results that surpassed expectations with anticipated revenue between $163.1 million and $164.1 million, exceeding the analyst consensus of $162.8 million. The company’s adjusted EBITDA is expected to range from $10.7 million to $11.2 million, outpacing the $8.63 million estimate. However, the company’s revenue forecast for the first quarter of 2025 fell short of expectations, with projections between $157 million and $161 million, which is below the $161.5 million analyst estimate.
RealReal also completed a debt exchange transaction, issuing approximately $147 million in new convertible senior notes due 2031 in exchange for about $183 million of its 2028 notes. For the full year 2025, RealReal projects revenue of $645 million to $660 million, aligning with the $652.3 million analyst consensus. The company expects adjusted EBITDA of $20 million to $30 million.
These are among the recent developments for RealReal, providing insight into the company’s financial performance and future expectations.
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