Despite Solid Q3 & Outlook, Rent The Runway Analyst Slashes Price Target By Half Citing Macro Uncertainties

  • Telsey Advisory analyst Dana Telsey reiterated an Outperform rating on the shares of Rent The Runway, Inc. RENT and reduced the price target from $8 to $4.
  • The company reported a 3Q22 adjusted EBITDA of $6.6 million versus $(5.6) million last year, well ahead of the market’s expectation of $1.3 million.
  • The upside was driven by stronger topline growth and better gross margin in the period, the analyst noted.
  • Total revenue increased 31.2% to $77.4 million, above the consensus of up 24.2% to $73.3 million and guidance of $72.0 million - $74.0 million. 
  • Gross margin expanded 740 basis points to 41.1%, ahead of the consensus of up 300 basis points to 36.7%, while total operating expenses leveraged 3,270 basis points to 76.0%.
  • The analyst said with the stronger Q3 results and modestly better Q4 guide, RENT raised its annual outlook for both total revenue and adjusted EBITDA margin.
  • With the recently announced restructuring plan largely complete, the company is seeing benefits to profitability, helping drive the third quarter outperformance and a better-than-expected outlook.
  • The analyst sees RENT as well positioned to capitalize on significant secular consumer trends with the potential to drive long-term growth.
  • Meanwhile, the analyst reduced the price target to reflect a more rational multiple given near-term macro uncertainties.
  • Price Action: RENT shares are trading higher by 72.1% at $2.34 on the last check Thursday.
  • Photo Via Company
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