The RealReal Analyst: Luxury Marketplace Has Competitive Moat

Increased brand visibility, accelerating growth and a low EV/sales multiple have resulted in a Needham analyst’s bullish stance on the e-commerce platform The RealReal, Inc. REAL.

The RealReal Analyst: Anna Andreeva initiated coverage on The RealReal, Inc. with a Buy rating and $35 price target. 

The RealReal Takeaways: The RealReal is the sole luxury marketplace operating at scale, said Andreeva in a Wednesday note. The company also has a competitive moat due to its robust authentication infrastructure, which has leveraged more data and processed more transactions than any other company in the space, said the analyst.

The RealReal saw a 2% drop in 2020 gross merchandise value; however, GMV is accelerating in 2021, beating both first- and second-quarter growth expectations by 7% and 8%, respectively, she said.

This acceleration is attributable to supply chain optimization, improved brand visibility, more competitive pricing through data and automation and the expansion of brick-and-mortar locations, Andreeva said.

Growth is expected to continue with increases in discretionary consumer spending as the company “diversifies from primarily in-home white glove services to neighborhood stores, vendor programs” and virtual, the analyst said.

The RealReal also trades at a 40% discount relative to its peer group, she said.

The company trades at a 3x EV/sales multiple compared to the Needham covered peer group’s 5.2x and 4.5x marketplace average.

The $35 valuation is derived from forecasted sales growth of 46% and 39% in 2021 and 2022, respectively, and a 4.4x EV/sales multiple on 2022 sales, said Andreeva.

REAL Price Action: Shares of The RealReal were trading 3.15% higher to $17.70 at last check Thursday.