Analyst: Revolve Is Capitalizing On The Influencer Revolution

Bank of America Merrill Lynch has initiated coverage on the newly public Revolve Group LLC RVLV

The Analyst 

Justin Post initiated coverage of Revolve with a Neutral rating and $36 price target.

The Thesis

"Revolve offers an aspirational consumer experience in women’s fashion powered by [a] data focused-merchandising approach," Post said in the Tuesday initiation note. (See his track record here.)

BofA is constructive on the online retailer's long-term fundamentals on the basis of brand equity, data-focused inventory curation, healthy user growth and positive marketing spend ROI, the analyst said. 

BofA does not anticipate large revenue upside surprises in 2019, and with the stock up 82% from the IPO price, views the stock as being close to fairly valued.

Amid the social media fashion influencer revolution, Revolve should be the top beneficiary of the movement, as it's cultivated a network of over 3,500 influencers alongside multiple marketing events to support the brand, Post said. 

Revolve’s strong brand and merchandising generates a positive ROI on marketing spend on the first transaction, which is unique in the e-commerce sector, the analyst said. The company has a profitable business model, with a 7.5% operating income margin expected in 2019, he said. 

Revolve has attractive growth prospects, but they come with high expectations, Post said. 

Price Action

Revolve shares were down 0.6% at $34.58 at the time of publication Wednesday. 
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