RealReal Inc. was initiated at buy or outperform Tuesday by at least four research groups following its June IPO, with analysts touting the company’s potential to disrupt the luxury resale category — but Bank of America analysts raise concerns about the company further down the line.
The RealReal
REAL, -0.73%
, an online marketplace for consigned luxury items, doesn’t run the risk of losing market share to e-commerce players like Amazon.com Inc.
AMZN, +0.45%
or eBay Inc.
EBAY, +0.89%
, Bank of America analysts led by Justin Post wrote, but it takes a lot of money to run the business.
“[T]he company’s salesforce-fueled supply model, item authentication and shipping capabilities have high fixed costs, which may push out breakeven to 2023, likely adding to stock volatility,” said Bank of America, which initiated The RealReal coverage at neutral with a $28 price target, though its analysts think the stock is “close to fairly valued” at $25.
Read: Newly-public luxury secondhand retailer The RealReal says it occupies a space of one
Many analysts think The RealReal is tapping into a new corner of the apparel market at a time when shoppers are more concerned about the environment, which is driving bullish outlooks.
“[W]e think The RealReal offers a unique value proposition for both consignors and buyers of secondhand luxury goods, and is well positioned to benefit from three secular trends in the luxury goods industry: increasing acceptance of resale ownership models and focus on sustainability; growing importance of millennial and Gen Z luxury consumers; and the shift from offline to online luxury spend,” UBS wrote in a note.
UBS rates The RealReal stock a buy with a $30 price target.
Analysts at Stifel highlight the elevated experience The RealReal provides and the rigorous process to authenticate the luxury items it sells.
“The RealReal is favorably positioned against limited competition due to its scale, which allows the company to provide a full-service model and also gives it the ability to leverage its vast store of proprietary data,” analysts wrote. “The market is in the early stages of resale becoming more mainstream, with wider acceptance among younger consumers seeking sustainability benefits and good value.”
See: 5 things to know about newly-public luxury secondhand retailer The RealReal
Stifel also points out that luxury holds on to its value over time thanks to a number of factors, including longevity and desirable brands. There’s also the potential for growth due to the large total addressable market and tailwinds for the sector.
“The secondhand personal luxury goods market is growing over two times faster than the primary market and is more penetrated online,” Stifel analysts led by Scott Devitt wrote. “In addition, there is an estimated $198 billion in luxury goods potentially available for sale in U.S. homes. As more individuals become comfortable buying and selling pre-owned goods, there is a strong opportunity to unlock supply supporting long-term growth.”
Stifel also rates The RealReal stock a buy with a $30 price target.
KeyBanc Capital Markets focuses on sourcing.
“The trusted relationships with luxury managers are a key component of driving repeat consignment behavior, and we think is a key differentiator,” analysts led by Ed Yruma wrote.
Don’t miss: Neiman Marcus, H&M join the growing list of brands that are tapping the secondhand market
The RealReal can also tap into two trends that are happening at the same time: the aforementioned move to luxury e-commerce and off-price luxury.
KeyBanc rates The RealReal overweight with a $31 price target.
Cowen also initiated The RealReal at outperform with a $32 price target.
Despite an upbeat note, Raymond James initiated The RealReal at market perform based on fair valuation of the shares.
Shares of The RealReal have slipped 14.8% from the close of its first day of trading on June 28 to the close of trading on July 23.
The Amplify Online Retail ETF
IBUY, +1.04%
has slipped 4.1% over the past year while the S&P 500 index
SPX, +0.68%
is up 7.1% for the period.
Source : MTV
