Bitcoin price today: gains to $120k, near record high on U.S. regulatory cheer
On Friday, UBS reiterated its Neutral rating on The RealReal Inc. (NASDAQ:REAL) stock with a price target of $3.90. The firm's assessment follows The RealReal's first-quarter performance, which showcased significant gross margin improvements.
The luxury consignment company's gross margins reached 74.6%, marking an increase of approximately 1120 basis points year-over-year. This uptick was attributed to the growth in the consignment segment and a reduction in the direct business line.
The improved margin outlook prompted UBS to adjust its long-term loss per share (LPS) estimates for The RealReal. The firm increased its forecasts for the fiscal years 2025 to 2027 by 22 cents, 14 cents, and 13 cents, respectively.
Despite these adjustments, UBS pointed out that there are still uncertainties regarding the potential profitability of The RealReal. The analyst noted that while the margins from the first quarter are expected to be sustainable, questions remain about the kind of profits the company can generate.
UBS's revised LPS estimates for The RealReal are in line with the broader sell-side consensus. This alignment indicates a shared caution among analysts about the company's financial prospects, despite the recent positive developments in its margin performance.
The RealReal, which operates within the online luxury consignment space, has been working to optimize its business model. The company's focus on expanding its consignment business, which typically offers higher margins than direct sales, has been a key factor in the improved financial metrics reported in the first quarter.
The maintained Neutral rating by UBS reflects a wait-and-see approach, as analysts continue to monitor The RealReal's progress towards achieving sustainable profitability. The company's ability to maintain its gross margin gains and translate them into net profits will be a critical factor for future assessments by market watchers.
In other recent news, The RealReal has shown promising financial results with a return to top-line growth for the first quarter of 2024. This marks the first overall growth in three quarters, driven by double-digit growth in consignment revenue.
This performance has led to the highest-ever gross margin rate and improved bottom-line results for the company. With an updated guidance for the second quarter and the full year, The RealReal is projecting a positive adjusted EBITDA for 2024.
The company remains optimistic about consumer health and market trends. In an effort to enhance client experience and scale profitably, The RealReal is investing in automation, AI, and data. New supply channels are being explored, including drop-ship consignment.
Despite projected slight decreases in Q2 and pressures on EBITDA due to salary increases and operational investments, the company continues to focus on growth strategies such as targeting the right sellers, optimizing promotional strategies, improving retention, and investing in technology.
InvestingPro Insights
Recent data from InvestingPro underscores the challenges and potential that The RealReal Inc. (NASDAQ:REAL) faces in its quest for profitability. With a market capitalization of $345.99 million and an impressive gross profit margin of 71.4% in the last twelve months as of Q1 2024, the company's financial health is a blend of strength and cautionary signals. The gross margin improvements noted by UBS are echoed in the company's recent performance, with a gross profit of $393.57 million. However, with a negative P/E ratio of -3.31 and an operating income margin of -17.02%, The RealReal's ability to turn its high gross margins into net profits remains a point of concern.
InvestingPro Tips highlight the company's significant debt burden and the risk it may have trouble making interest payments on its debt. Additionally, the stock price has experienced volatility, with a one-month price total return of -17.34% but a notable six-month price total return of 64.9%. Analysts have revised their earnings upwards for the upcoming period, indicating some optimism amidst the uncertainty. For investors seeking a deeper analysis, there are additional InvestingPro Tips available, providing a comprehensive look at The RealReal's financial outlook. To access these insights and optimize your investment strategy, consider using coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.