This Analyst Is Bullish On Rent The Runway, But Sees Near Term Uncertainties Amid Efforts To Lower Churn

Raymond James analyst Rick B. Patel reiterated an Outperform rating on the shares of Rent The Runway Inc RENT with a price target of $8.
The company reported a 4Q beat on revenue and adj. EBITDA compared to the consensus estimate.
For 2023, the company gave a revenue guidance of 10% y/y growth (Street +18%) and EBITDA percentage guide of 8-9%.
RENT is accelerating efforts to reduce churn, incl. offering an extra item per shipment at no extra cost, and this is benefiting loyalty, said the analyst.
The analyst noted that despite demand choppiness in 2022, adjusted EBITDA margins improved by 1,170 basis points y/y in 2022 to +2.3%.
Better retention and new customers are expected to drive Subscribers growth of 25% in 2023. However, the analyst expects a 16% subscriber growth in an uncertain macro climate.
The analyst remarked that the exit of CFO Scarlett O’Sullivan is a negative for RENT as it creates uncertainty.
Overall, RENT is showing it has levers to drive demand while also significantly improving margins, and the bar is low, said the analyst.
Price Action: RENT shares are trading lower by 11.43% at $2.79 on the last check Thursday.

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