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Bear of the Day: The RealReal (REAL)

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David Bartosiak
·4 min read
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This is a market where it is easy to pick on some stocks. After all, we are living in the post-COVID world, where beating up on certain industries have been a daily occurrence. But, in actuality, the Bear of the Day is not meant to be a hit piece. I am saying this to long-term share holders which may take offence to such articles. Rather, the Bear of the Day is merely meant to point out some trends which folks may not have been paying the closest attention to. Namely, the trend in earnings estimate revisions that people may not even be aware of.

Today’s Bear of the Day is The RealReal (REAL). The RealReal, Inc. operates an online marketplace for consigned luxury goods. It offers various resale product categories, including women's, men's, kids', jewelry, and watches, as well as home and art products. The company was founded in 2011 and is headquartered in San Francisco, California.

If you have ever bought a luxury item for $300, wanted to get $150 for it and settled for a $30 check, then you probably know the RealReal. I am not making this to be a hit piece, as I said before, I am merely speaking from my personal experience in selling an item on the site. I am not saying that their coupon applications destroy seller’s equity across the board, I’m just saying I was robbed by them once. It seems that there are analysts out there which have also taken note on some of their sales practices.

In the post-COVID world, an online apparel website should be killing the game. This website, has still yet to make real profits. Current year estimates call for a $1.63 loss per share. That has gotten worse than the $1.41 per share loss previously expected just 90 short days ago. For the growth crowd, next year is not forecast to be much better. Next year estimates call for a $1.32 loss. That widening loss compared to the $1.07 loss forecast 90 days ago is due to 5 analysts cutting their numbers for the stock.

The RealReal, Inc. Price and Consensus

The RealReal, Inc. Price and Consensus
The RealReal, Inc. Price and Consensus

The RealReal, Inc. price-consensus-chart | The RealReal, Inc. Quote

This market, while is sounds great, is probably not as profitable as the RealReal would like to have you believe. Especially as they continue to gauge sellers for their profit margins. This is not a business model with real sustainability. It’s a function of, fool me once, shame on you. Fool me twice, well, you don’t need President George W Bush to fill in the rest. Repeat business does not come that easy when you burn sellers the first time.

You don’t need to take me word for it. Just look at the estimates. The proof is in the pudding, and an online marketplace for second-hand luxury goods should be doing great in an online ordering environment. Somehow, the RealReal is struggling.

The Consumer Products – Discretionary industry is in the Top 27% of our Zacks Industry Rank. While the RealReal is tanking with our worst rank, there are a few other names within the good graces. These stocks include The Container Store (TCS) and Lifetime Brands (LCUT) which are both Zacks Rank #2 (Buy) stocks.

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Container Store The (TCS) : Free Stock Analysis Report
 
The RealReal, Inc. (REAL) : Free Stock Analysis Report
 
Lifetime Brands, Inc. (LCUT) : Free Stock Analysis Report
 
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