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.
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