What happened

Shares of luxury goods consignment company The RealReal (NASDAQ:REAL) were up 71.1% in September, according to data provided by S&P Global Market Intelligence. But the stock is still down 26.8% since its IPO in June.

So what

The RealReal has only released one quarterly earnings report as a public company, and despite beating analysts' expectations, it was poorly received by the stock market. RealReal shares sank 14.8% the day of the announcement and continued to slide throughout the month. Considering that revenue increased 51% year over year and gross profit was up 50% (plus net losses were smaller than expected), the market's reaction seemed extreme.

A man uses his finger to trace an upward curve

The RealReal has a couple of brick-and-mortar stores, but its big focus is online. Image source: Getty Images.

In September, though, investors seemed to reevaluate the prospects of The RealReal. This may have partly been influenced by a report from Credit Suisse analyst Michael Binetti, which was quoted in Forbes in mid-September. Binetti said, "We believe the secondhand/resale market could grow much faster in the near-term than the +mid-teens growth that industry sources project." The article was widely shared among fashion websites. 

But the stock really took off on Sept. 26, after CFO Matt Gustke received a warm welcome at the Wells Fargo Securities 2019 Consumer Conference. Moderator Ike Boruchow, the managing director of specialty retail/textile brands and e-commerce for Wells Fargo, introduced Gustke by saying that "It's one of the categories we find to be most compelling in the market right now."

Boruchow seemed no less impressed after Gustke's presentation, declaring, "Super-exciting category, and Matt, you are the leader in it." His enthusiasm seems to have prompted some investors to take a chance on the young company.

Now what

Not a lot has changed for The RealReal. It's predicting continued top-line growth with eventual EBITDA profitability, but Gustke himself said during his presentation that was "down the road" and declined to give an exact estimate of when it might occur. For now, The RealReal is like any recent retail industry IPO: a promising but risky company that, if it can execute on its long-term growth strategy, could turn into a winner. Most investors, though, will want to see at least another few quarters of progress before they consider jumping in.