Why This Revolve Group Analyst Is Turning Bullish

Shares of Revolve Group Inc RVLV have lost almost 19% over the past month.

The company is poised for gross margin expansion, driven by more controlled inventory and likely stabilization or nominal improvements in return rates, according to Piper Sandler.

The Revolve Group Analyst: Edward Yruma upgraded the rating for Revolve Group from Neutral to Overweight, while raising the price target from $16 to $21.

The Revolve Group Thesis: Weakness in the company’s performance in 2023 can be largely attributed to the external environment, Yruma said in the upgrade note.

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Revolve’s active customer count “remained positive despite a difficult spending environment,” the analyst stated. “Given the high fashion content in the apparel and the somewhat narrow target age range, we think that 2024 should see a replacement cycle,” he added.

“We think that RVLV can improve GM at least 100-200 bps over the next two years, which should drive an incremental ~22% lift in EPS,” Yruma further wrote.

“A strong balance sheet gives Revolve significant capital and strategic flexibility,” the analyst said.

RVLV Price Action: Shares of Revolve Group had risen by 0.35% to $14.45 at the time of publication Wednesday.

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