Rent the Runway stock remains a show-me story despite earnings rally

By Senad Karaahmetovic 

Shares of Rent the Runway (NASDAQ:) are trading over 15% higher in pre-open Thursday after the company raised its full-year forecast.

RENT a loss per share of $0.56 on revenue of $77.4 million, which compares to the average analyst estimate for a loss per share of $0.71 on sales of $73.3M

For this quarter, the company said it expects to generate revenue in the range of $72-74M, beating the analyst consensus of $71.9M. For FY2023, RENT raised its revenue forecast to $293-295M from $285-290M, and higher than the estimate of $288.3M.

In the statement following the Q3 earnings report, Rent the Runway said its restructuring plan is “now substantially complete.”

Wells Fargo analysts said the results suggest that Rent’s business is stabilizing. Still, RENT stock remains “a show-me story, encouraged by improving stability and increasing margin progress.”

“Net/net, while we’re encouraged by RENT’s recovery and further visibility into margins, shares are likely to remain a show-me story in NT. We reiterate our bullish stance on the business and ability of the model to scale with secular top-line tailwinds (shift to ecomm, consumer quest for value, and so on) as well as recovery from COVID (return to work, events, and so on),” the analysts said in a client note.

With restructuring essentially completed, RENT was able to drive margins upside, wrote Goldman Sachs analysts. They reiterated a Buy rating and PT of $6.

“Looking out over the next 12 months, we see execution (in terms of fiscal year exit velocity) on the restructuring initiatives and a return to more visible linear subscriber trends (even if a mix of growth and seasonality) as key to investor debates. Longer term, we still see RENT as the leader in the subscription-based effort to drive the adoption of the sharing economy theme in the apparel sector,” the analysts wrote.