Why This Revolve Group Analyst Says Online Fashion Retailer Is A Buy

Revolve Group Inc RVLV is “an ultimate reopening play” and the Street's sales growth estimate of 35% for the first half of the year in 2022 appears conservative, according to Needham.

The Revolve Group Analyst: Anna Andreeva initiated coverage of Revolve Group with a Buy and a price target of $60.

The Revolve Group Thesis: The Coachella Valley Music and Arts Festival is sold out for the first time since 2019, indicating that in-person events are back, Andreeva said in the note.

Revolve Group’s “unique social media/influencer model” is a differentiator for customer acquisition and the company benefits from consumers engaging in travel and experiences, she added.

“Owned brands have pricing power (consumers don't differentiate between 3rd party and RVLV brands) with GMs est. ~18-20 points higher. Owned-brand penetration peaked at 36% in '19, declined to 20% in '21, and is now heading higher--we estimate ~100 bps boon to GM from mix shift annually,” the analyst wrote.

“Valuation is resetting downward despite positive sales momentum. We think a rare combination of rapid sales growth with strong profitability deserves a premium,” Andreeva mentioned.

RVLV Price Action: Shares of Revolve Group rose by 1.74% to $47.88 at the time of publication Thursday.