On Thursday, KeyBanc Capital Markets shifted its stance on Revolve Group (NYSE:RVLV), upgrading the company's stock rating from Sector Weight to Overweight and setting a price target of $37.00. The upgrade comes as a result of increased confidence in the company's prospects following discussions at KeyBanc's Consumer Spotlight event in December and in anticipation of Revolve's fourth-quarter results, due February 20. The company has shown impressive momentum, with a 106.55% return over the past year and maintaining strong financial health with a current ratio of 2.71.Want deeper insights? InvestingPro subscribers have access to 13 additional expert tips and comprehensive financial analysis for Revolve Group.
Ashley Owens, an analyst at KeyBanc, noted that the previous downgrade in late 2023 was driven by concerns over top-line pressures, the need for inventory rightsizing, and high return rates. However, moving into 2025, there appears to be clearer visibility on these issues. Revolve Group has demonstrated a return to top-line growth and EBITDA margin expansion, buoyed by an expanding consumer base and improvements in average order value (AOV).
The company's improved performance has allayed previous concerns, and KeyBanc now believes that the medium-term fundamentals for Revolve are no longer overshadowed. Owens suggests that Revolve is positioned to resume steady top-line growth and margin expansion at the beginning of the year.
According to InvestingPro analysis, Revolve currently trades at an EV/EBITDA multiple of 48.9x and a P/E ratio of 54.7x, suggesting rich valuations. The upgraded price target of $37.00 is based on 22.8 times the estimated EBITDA for 2026, reflecting a positive outlook on the company's financial health and market position. KeyBanc's assessment indicates a belief in the company's ability to maintain its growth trajectory and improve profitability in the near future. For comprehensive valuation insights and detailed financial analysis, explore Revolve's Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Revolve Group has been the focus of several analyst notes. Stifel maintained a Buy rating on the company's shares, with a price target of $41, citing expectations of a top and bottom line beat in the upcoming fourth-quarter earnings. The firm has increased its revenue estimate for Revolve to $286.1 million and adjusted EBITDA to $10.7 million. Meanwhile, KeyBanc reiterated its Sector Weight rating for Revolve after observing increased promotional activity following Black Friday.
These recent developments follow a robust third quarter for Revolve. The company reported net sales of $283 million, marking a 10% year-over-year increase. Net income also saw a significant rise, reaching $11 million, up from $3 million in the same quarter of the previous year. Adjusted EBITDA grew by 85% to hit $18 million.
Revolve's growth has been attributed to improved logistics, decreased return rates, and strong performance in key categories. The company has also been investing in AI technology and international expansion, contributing to its positive outlook. Despite higher than desired inventory levels, alignment with sales growth is expected by the fourth quarter. Plans are also in place to open a Revolve Holiday Shop and a flagship store by mid-2025.
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