What Happened?
Shares of secondhand luxury marketplace The RealReal (NASDAQ: REAL) jumped 18.6% in the morning session after its second-quarter financial results surpassed analyst expectations and the company raised its full-year guidance. The online luxury marketplace reported second-quarter revenue of $165.2 million, up 14% year-over-year and beating analyst estimates. The company also posted a narrower-than-expected adjusted loss per share of $0.06, which was better than the consensus estimate of a $0.08 loss. A significant highlight was the company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which reached $6.84 million, nearly double what analysts had projected. Building on this momentum, The RealReal increased its full-year revenue forecast and provided strong adjusted EBITDA guidance, signaling management's confidence in its operational strategy and continued growth prospects.
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What Is The Market Telling Us
The RealReal’s shares are extremely volatile and have had 66 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 previous big move we wrote about was 22 days ago when the stock gained 7% on the news that B. Riley Securities initiated coverage on the company with a "Buy" rating. The investment firm set a price target of $8.00, suggesting a significant potential upside from the stock's current price. B. Riley's positive outlook is based on The RealReal's substantial improvements in profit margins, which have expanded by about 12 percentage points since the first quarter of 2023. This growth is attributed to changes in the company's commission structure and a strategic shift away from direct buying. The analyst also highlighted the company's achievement of positive adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for three straight quarters, expecting further improvement as The RealReal capitalizes on its platform investments. The firm views The RealReal's supply chain, which primarily consists of domestic pre-owned goods, as a key advantage, especially as competitors face cost disruptions from tariffs.
The RealReal is down 35% since the beginning of the year, and at $6.40 per share, it is trading 42.8% 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 $411.12.
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