What happened
Shares of Revolve Group (RVLV 2.24%) were moving higher today after the influencer-based online apparel shop scored a round of new analyst endorsements. The news comes as the customary quiet period following IPOs ended for Revolve Group, which debuted on the market on June 7.
As of 11:48 a.m. EDT, the stock was up 8.9%.
Image source: Revolve Group.
So what
According to Bloomberg, of the nine analysts who weighed in on the stock, eight rated it a buy, further evidence that the market is bullish on the e-commerce star -- its shares have already doubled since its IPO at $18 a share. In a market full of debutantes, Revolve seems to have benefited from actually being profitable, a rare attribute in the newest crop of IPOs.
Several analysts praised the stock, including Jefferies' Randal Konik, who said, "Revolve is the future of retail and brand marketing with its digital commerce platform built on a data-driven backbone and an enviable influencer ecosystem," and gave it a price target of $60, higher than any other analyst.
Oliver Chen of Cowen joined the chorus, saying, "Revolve is well-positioned to grow its active user base as it captures fashion-focused Millennial and Gen-Z shoppers through its on-trend assortment, its influencer-based marketing model, and its emphasis on experiential events to promote the brand."
The lone hold rating came from Barclay's Ross Sandler, who liked the company's business model and financials but was concerned about the valuation.
Now what
It's clear that e-commerce is disrupting and permanently altering the apparel industry. And while there have been a number of losers, including department stores and mall-based chains, that have been forced to close stores, Revolve Group has been a clear winner. The company has carved out a niche with a growing demographic of young shoppers. Revenue grew 25% last year to $498.7 million with $30.6 million in profit, and it has enviable gross margins at 53%.
However, after the post-IPO surge, the stock isn't cheap, trading at a P/E ratio above 80. Whether Revolve can deliver the growth to justify that high valuation, especially with e-commerce competition increasing, remains to be seen.
