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The RealReal Inc REAL

Morningstar Rating
$2.76 +0.99 (55.93%)
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Company Report

The RealReal Earnings: Restructuring Lessens Risk of Debt Default or a Dilutive Equity Raise

The headline from no-moat The RealReal's fourth-quarter earnings report is that the firm is not likely to go bankrupt until at least until 2028 after it restructured $145.8 million of its outstanding 2025 convertible notes (roughly 86% of that series). While the restructured notes carry an eye-popping 13% interest rate (8.75% cash plus 4.25% paid in kind), the restructuring reduces The RealReal's total debt load by $17 million and pushes repayment on that series out until 2029. At that point, we forecast the firm will be free cash flow positive, and we believe that capital markets may prove more accommodative. The deal, while punitive, is much less dilutive than our previous expectation for roughly 3 times dilution at unfavorable equity prices. The net effect is an 80% increase in our intrinsic valuation to $2.08 from $1.21. While opening prices for March 1 trading are extremely uncertain, shares traded close to our revised valuation after a roughly 20% jump in after-hours trading on Feb. 29.

Price vs Fair Value

REAL is trading at a 33% premium.
Price
$2.76
Fair Value
$2.62
Uncertainty
Very High
1-Star Price
$5.92
5-Star Price
$9.39
Economic Moat
Lft
Capital Allocation
Jjkkz

Bulls Say, Bears Say

Bulls

Partnerships with Stella McCartney, Burberry, and Gucci should bolster trust in The RealReal's authentication services, addressing a key pain-point in luxury e-commerce.

Bears

Growth in mobile commerce and younger luxury consumers may favor cheaper self-service marketplaces like eBay, Poshmark, or Mercari.

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News

Trading Information

Previous Close Price
$1.77
Day Range
$2.132.88
52-Week Range
$1.002.94
Bid/Ask
$2.74 / $2.76
Market Cap
$285.25 Mil
Volume/Avg
36.9 Mil / 3.2 Mil

Key Statistics

Price/Earnings (Normalized)
Price/Sales
0.49
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

The RealReal is the largest pure-play luxury resale platform in the US, generating $1.7 billion in 2023 gross merchandise volume and addressing a niche (personal luxury resale) that had previously been serviced by inefficient upscale boutiques and local pawn shops. The company generates revenue via consignment and first-party sales on its online marketplace, and through a small volume of direct sales. With a hands-on approach that actively sources inventory and authenticates every item on its platform, The RealReal is able to justify much higher take rates than peers, working out to roughly 34% of net merchandise value, which excludes returns, cancellations, and first-party sales.
Sector
Consumer Cyclical
Industry
Luxury Goods
Stock Style Box
Small Value
Total Number of Employees
3,468

Competitors

Valuation

Metric
REAL
JWN
RVLV
Price/Earnings (Normalized)
14.1046.22
Price/Book Value
4.614.21
Price/Sales
0.490.231.56
Price/Cash Flow
3.0949.42
Price/Earnings
REAL
JWN
RVLV

Financial Strength

Metric
REAL
JWN
RVLV
Quick Ratio
1.040.191.37
Current Ratio
1.301.002.79
Interest Coverage
−17.481.93
Quick Ratio
REAL
JWN
RVLV

Profitability

Metric
REAL
JWN
RVLV
Return on Assets (Normalized)
−20.50%4.27%5.29%
Return on Equity (Normalized)
58.03%8.28%
Return on Invested Capital (Normalized)
−29.55%8.90%7.53%
Return on Assets
REAL
JWN
RVLV
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