What happened
Shares of Revolve Group (RVLV 1.42%), the influencer-driven e-commerce apparel company, were gaining on Tuesday after the stock got a bullish analyst note.
As a result, Revolve stock was up 11.2% as of 3:26 p.m. EST today.
Image source: Revolve Group.
So what
Piper Sandler initiated coverage on Revolve with an overweight rating and a price target of $30, representing 11% upside for the stock after today's gains. Analyst Erinn Murphy sees Revolve as a "recovery stock" as the company should benefit from a return to social events, concerts, weddings, and other occasions in 2021. Murphy said the reopening should provide a "solid tailwind" for the company.
The apparel industry has been hit hard by the pandemic, and Revolve is no exception, especially as the company is focused on fashion and "occasion-wear" for millennials and Gen Zers. Dresses, for example, are its largest category.
Revolve's revenue, which was growing quickly before the pandemic, fell 2% in the most recent quarter, though profits actually rose thanks to cost-cutting and effective inventory management, a testament to management's execution during a tough time. The stock still fell on the news.
Now what
Investors may also want to look to Stitch Fix as an analog for Revolve since that e-commerce apparel stock exploded last week after the company posted strong guidance for the upcoming year, indicating that it had emerged from the doldrums of the pandemic and is on the rebound.
Revolve shares have also been on the mend lately, and in fact, the stock is now up 48% year to date, a reflection of hopes for the post-pandemic reopening as well as a bullish investor sentiment across the board.
Murphy makes a good point. As an online apparel seller focused on young adults, Revolve is likely to be a winner in the aftermath of the pandemic as there is certainly pent-up demand for concerts, events, and social gatherings in general. Splurging on new outfits will definitely be a part of the recovery economy.
