Tuesday, The RealReal Inc. (NASDAQ: NASDAQ:REAL) maintains a Buy rating and a $3.50 price target from BTIG, following the announcement of a leadership change. Rati Sahi Levesque, previously the President & COO, has taken over as CEO effective immediately. The former CEO, John Koryl, who has been in the position since February 2023, has left the company.
The announcement came before market opening on Tuesday, with Levesque stepping in as CEO, a role she's familiar with having co-founded the company and served in various senior roles, including interim Co-CEO. Under Koryl's leadership, the company's shares saw a 53% increase as of October 25.
While his departure was unexpected, BTIG views Levesque as highly qualified, citing her extensive knowledge of the company and her pivotal role in implementing operational improvements.
These improvements include a revamped commission structure, enhanced supply acquisition, and store operation changes, which Levesque had a significant hand in during her time as interim CEO. BTIG believes there will be no operational disruptions with the transition, as all functional heads were already reporting to her.
In addition to the CEO transition, The RealReal provided preliminary third-quarter results for 2024, which exceeded expectations in gross merchandise volume (GMV), revenue, and EBITDA margin. The company also issued full-year guidance that suggests a performance in line with expectations for the fourth quarter of 2024, despite third-quarter GMV outperforming.
The guidance reflects a cautious approach due to the uncertain macroeconomic environment and the upcoming election, rather than any signs of a slowdown.
BTIG also highlighted The RealReal's achievement of EBITDA positivity for the first time in a non-holiday quarter, reinforcing the belief that sustained EBITDA profitability is on the horizon. The firm will update its model following the company's full third-quarter report on November 4, 2024, but for now, maintains its Buy rating without any review of its estimates.
In other recent news, The RealReal has upgraded its full-year guidance, now aiming for an adjusted EBITDA between $4.5 million to $7.5 million, an increase from the previous estimate of $3.0 million.
Analysts from KeyBanc maintained a Sector Weight rating on the company's shares, noting progress towards profitability but expressing caution due to broader uncertainties in the retail sector. Another key highlight was the company's Q2 2024 results, which showed accelerated year-over-year Gross Merchandise Value (GMV) growth and double-digit revenue growth, along with a significant improvement in adjusted EBITDA.
These developments, along with a 17% year-over-year increase in consignment revenue and a 9% growth in active buyers, underscore the company's focus on leveraging advancements in AI and data on luxury items to drive operational efficiencies and profitability.
These are the recent developments for The RealReal.
InvestingPro Insights
The RealReal's recent leadership change and positive preliminary Q3 results are complemented by several key financial insights from InvestingPro. The company's impressive gross profit margin of 73.39% for the last twelve months as of Q2 2024 aligns with BTIG's positive outlook on the company's operational improvements. This high margin suggests The RealReal's business model is effectively monetizing its luxury consignment platform.
An InvestingPro Tip notes that the company "operates with a significant debt burden," which investors should consider alongside the recent EBITDA positivity highlighted in the article. Despite this, another InvestingPro Tip indicates that "2 analysts have revised their earnings upwards for the upcoming period," potentially reflecting optimism about the company's future performance under new leadership.
The RealReal's stock has shown a remarkable 126.62% price total return over the past year, which corresponds with the 53% increase in share price under former CEO John Koryl's tenure mentioned in the article. This performance suggests that the market has been responding positively to the company's strategic direction.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for The RealReal, providing a deeper understanding of the company's financial health and market position.
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