Please ensure Javascript is enabled for purposes of website accessibility

Why The RealReal Stock Plummeted 26% at the Open Today

By Reuben Gregg Brewer - May 11, 2021 at 11:51AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The luxury consignment retailer got hit by its earnings report and, perhaps, by some broader trends in the market today.

What happened

Shares of The RealReal (REAL -7.91%), which offers luxury consignment services, lost roughly a quarter of their value at one point in the first hour of trading on May 11. The stock managed to pare the steep initial decline some, as it was down by "just" 17% at 11 a.m. EDT. There were likely two factors behind the negative mood here: market trends and the company's earnings release after market close on May 10.  

So what

A good portion of The RealReal's business is handled over the internet, even though it has a handful of physical locations. So, in many ways, it can be viewed as something of a technology play even though, at the end of the day, it's really just a consignment retailer. Over the last couple of trading sessions investors have been selling technology names, with a notable decline today highlighted by the technology-heavy Nasdaq Composite leading the broader market's early morning drop. So, a portion of The RealReal's dramatic price decline is probably related to bigger-picture market psychology. But not all of it.

A man looking at a line crashing through the floor beneath him.

Image source: Getty Images.

That's because The RealReal also reported earnings. Revenue came in at $98.8 million in the first quarter of 2021, up 27% from the first quarter of 2020. And sales beat Wall Street consensus estimates by a few percentage points. However, on the bottom line, the results weren't nearly as positive. The company lost $0.49 per share on an adjusted basis versus a loss of $0.39 per share in the year-ago period. Analysts, meanwhile, were looking for a loss of $0.46 per share. This is the fourth consecutive miss over the past year. Add that backdrop to the mood shift with regard to technology-related names, and it makes sense that investors dumped out of The RealReal today.    

Now what

To be fair, The RealReal's consignor base is growing and the volume of goods it sells has been increasing. So it would be hard to call the quarterly update terrible. However, even the company admitted that it was still just working its way toward profitability. And the hope of future profitability just wasn't enough to keep investors interested in what The RealReal was offering today.  

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The RealReal, Inc. Stock Quote
The RealReal, Inc.
$2.91 (-7.91%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.