The RealReal stock initiated with Buy rating at B.Riley on margin growth

Investing.com - The RealReal Inc. (NASDAQ:REAL), currently trading at $5.22 with a market capitalization of $590 million, received a Buy rating initiation from B.Riley on Thursday, with analyst Anna Glaessgen setting an $8.00 price target for the online luxury resale marketplace. According to InvestingPro analysis, the stock appears overvalued at current levels.

The company, which B.Riley identifies as the largest online resale marketplace for authenticated goods, has demonstrated a 13% five-year compound annual growth rate (CAGR) in gross merchandise value (GMV). Recent data from InvestingPro shows the company maintaining strong revenue growth of 11.89% and impressive gross margins of 74.63%.

B.Riley highlighted The RealReal’s significant margin improvements, noting approximately 12 percentage points of gross margin expansion since the first quarter of 2023, driven by refinements to the commission structure and normalization of segment mix that deemphasized direct buying.

The research firm pointed to The RealReal’s achievement of positive adjusted EBITDA for three consecutive quarters, with expectations for continued improvement as the company leverages its platform investments.

B.Riley also expressed optimism about The RealReal’s supply source, which consists primarily of domestic pre-owned goods, describing this as "particularly attractive" amid tariff-related cost disruptions affecting competitors in the primary market.

In other recent news, The RealReal has reported its Q1 2025 financial results, surpassing expectations with an earnings per share (EPS) of -$0.08, slightly better than the forecasted -$0.09. The company also achieved a revenue of $160 million, exceeding the anticipated $159.83 million and marking an 11% increase year-over-year. The RealReal has been actively reducing its debt, having paid off the remaining $26.75 million of its convertible notes due in 2025. This move is part of a broader strategy to strengthen its financial position, with a total debt reduction of $81 million over the past 16 months.

Additionally, the company has launched several AI-driven initiatives to enhance its operations, contributing to a 9% year-over-year increase in gross merchandise value (GMV) to $490 million. The RealReal’s active buyers also grew by 7% to 985,000. The company has reaffirmed its full-year 2025 guidance, projecting GMV between $1.96 billion and $1.99 billion, and revenue between $645 million and $660 million. Analyst firms have not issued any recent upgrades or downgrades for The RealReal. The company’s strategic focus on profitability and operational flexibility was emphasized by CEO Rathi Leveque, who highlighted the brand’s strength and adaptability in the current market environment.

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