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Why The RealReal Stock Soared Today

By Evan Niu, CFA - Dec 15, 2020 at 1:32PM

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Piper Sandler kicked off its coverage of the luxury consignment specialist with a bullish outlook.

What happened

Shares of The RealReal ( REAL 1.69% ) soared by as much as 13% on Tuesday morning after getting a bullish initiation from Wall Street. Piper Sandler kicked off coverage of the stock with an overweight rating and a price target of $19. As of 1:30 p.m. EST, shares were up by about 10.6% to just under $17.

So what

Analyst Erinn Murphy anticipates that gross merchandise volume (GMV) on the luxury consignment e-commerce platform will rise as COVID-19 vaccinations ramp up. The consumer discretionary company's GMV was growing by 40% prior to the pandemic, according to Piper Sandler, but the public health crisis has impacted supply. The RealReal should overcome that challenge as the pandemic is brought under control in the months ahead.

Green stock chart going up

Image source: Getty Images.

"We are optimistic that closet clean-outs should rebound post vaccine which should support supply [and] in turn meet demand and see GMV accelerating starting in [the second quarter of 2021]," the analyst wrote in a research note to investors.

Now what

The RealReal, which sells both online and through brick-and-mortar stores, is still several years away from achieving sustainable profitability. Murphy doesn't anticipate that it will become profitable until at least 2022. Still, the analyst is encouraged by other moves that management has made to reduce losses during the pandemic such as expanding virtual appointments and opening smaller stores. Piper Sandler believes that The RealReal shares face limited risk and could continue to see positive news throughout next year.

Last month, the company reported a 3% decline in GMV during the third quarter. Management did not provide guidance for the fourth quarter due to ongoing uncertainties related to the pandemic.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

The RealReal, Inc. Stock Quote
The RealReal, Inc.
REAL
$13.28 (1.69%) $0.22

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