What Happened?
Shares of secondhand luxury marketplace The RealReal (NASDAQ: REAL) fell 17.7% in the afternoon session after the company reported underwhelming fourth-quarter 2024 results: its full-year EBITDA guidance missed significantly, and its number of active buyers fell slightly short of Wall Street's estimates. Revenue grew 14% year on year, fueled by a 12% increase in gross merchandise value (GMV), however, it barely scaled past Wall Street's estimates, evoking no excitement. Despite the growth concerns, profits improved. However, it's not clear if the momentum can be sustained as the company guided for full-year 2025 EBITDA between $20 million and $30 million, a shortfall compared to analysts' expectations. First-quarter revenue guidance also suggests a potential slowdown from the strong holiday-driven Q4. While RealReal continues to make progress toward profitability, the weaker revenue outlook and slightly disappointing buyer growth raise questions.
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What The Market Is Telling Us
The RealReal’s shares are extremely volatile and have had 59 moves greater than 5% over the last year. But moves this big are rare even for The RealReal and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 2 months ago when the stock gained 39.4% on the news that a Wells Fargo analyst upgraded the stock's rating from Equal Weight (Hold) to Overweight (Buy) and bumped the price target from $4 to $15. The analyst credited the upgrade to the company's improved focus on profits under new leadership. Key factors driving the change included higher profit margins from a revamped consignment fee structure and less dependence on low-margin direct sales. The analyst thinks the recent debt overhaul also lowered financial risks, setting the stage for the company to generate positive free cash flow by 2025.
The RealReal is down 34% since the beginning of the year, and at $6.49 per share, it is trading 41.9% below its 52-week high of $11.18 from December 2024. Investors who bought $1,000 worth of The RealReal’s shares 5 years ago would now be looking at an investment worth $408.18.
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