Why The RealReal (REAL) Stock Is Up Today

Radek Strnad /
2024/03/01 11:40 am EST

What Happened:

Shares of secondhand luxury marketplace The RealReal (NASDAQ: REAL) jumped 37.2% in the morning session after the company reported fourth-quarter results that beat analysts' revenue expectations. The company delivered positive EBITDA for the first time as it focused on its consignment business, a strategic shift it enacted in 2023. Its average order value was 10% larger than in the same quarter last year thanks to higher prices for its products. On the other hand, volumes declined by 17%. Furthermore, its number of active buyers fell. Looking ahead, its revenue and EBITDA guidance for the full year 2024 topped Wall Street's projections. 

Overall, this was a decent quarter, with the promising guidance likely providing more reason for investors to stay positive. Additionally, there is a decent short interest of over 10% on the stock, which means that some investors are betting against the company. Short covering--those betting against it getting out of those positions following good results--may be magnifying the stock price move today.

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What is the market telling us:

The RealReal's shares are very volatile and over the last year have had 84 moves greater than 5%. But moves this big are very rare even for The RealReal and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 10 months ago, when the stock gained 8.7% on the news that a report that the company is on the radar of private equity suitors for a possible acquisition. Earlier this year, the company presented a new savings plan to reduce operating expenses, including downsizing staff and optimizing its real estate footprint. In line with this plan, The RealReal will lay off around 230 workers, representing around 7% of its workforce.

The RealReal is up 26.4% since the beginning of the year, but at $2.49 per share it is still trading 12.7% below its 52-week high of $2.85 from September 2023. Investors who bought $1,000 worth of The RealReal's shares at the IPO in June 2019 would now be looking at an investment worth $86.14.

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