What happened

Shares of The RealReal (REAL -6.09%) took off like a rocket ship at the open on Nov. 9, gaining just shy of 25% in the first hour or so of trading. By roughly 11 a.m. EST the stock had given back a big chunk of that advance, however, and was sitting with a still robust price increase of about 15.5%. The news driving investors here was the company's third-quarter earnings update, which hit the market after the close of trading on Nov. 8.

So what

The retailer, which bills itself as the world's largest online marketplace for authenticated, resale luxury goods, saw a 50% year-over-year increase in the value of the goods passing through its systems. The third-quarter 2021 number was also roughly 45% higher than the value seen in the third quarter of 2019, prior to the pandemic. The company handled about 38% more orders in the third quarter of 2021 than it did in 2020. The RealReal also made about 4% more per order on its site. So, more products and more money per order. Those are positive trends, which the company hopes will continue through the end of the year and into 2022.

A person raising their arms in triumph in front of a computer.

Image source: Getty Images.

Revenue in the third quarter totaled $119 million, up 53% from the same period of 2020 and 43% from the same quarter in 2019. That said, this is still a relatively small company looking to build its business, and the adjusted loss per share came in at $0.47, worse than the $0.41 it lost in 2020. However, the red ink here wasn't as bad as analysts had been expecting and the top line was a bit higher than projected. Investors like it when companies outdo Wall Street projections.

Now what

All in, it was a pretty good quarter for The RealReal, as long as you couch it in the company's ongoing efforts to scale up its business. Investors were rightly pleased. That said, conservative types would probably be better off sticking to profitable retail companies as opposed to investing in an upstart like The RealReal. That's not meant to disparage the company, only to highlight that there is a risk that this online "second-hand" shop, despite its grand designs, may not actually have a large enough market to serve.