Revolve Earnings: Tough Macro Environment Hammers Sales Momentum and Profitability, but Shares Cheap

After digesting no-moat Revolve’s mixed fiscal 2023 first-quarter results, we plan to trim our $33.50 fair value estimate by a high-single-digit percentage, reflective of our less sanguine outlook for the year and into 2024. We now forecast a slight decline in net sales growth and 4.6% operating margin for the year, down from preprint estimates for 6.3% growth and a 5.7% margin. Despite a 3%-4% pullback on the print, shares offer a compelling buying opportunity at current trading prices (trading nearly 40% below our revised valuation), although a turnaround catalyst may not materialize until macro pressures subside.