Rent the Runway Shares Gain After Earnings Beat, Analysts Positive

© Reuters. Rent the Runway (RENT) Shares Gain After Earnings Beat, Analysts Positive

Shares of Rent the Runway (RENT) are up almost 8% in premarket trading Friday after the e-commerce company reported Q1 earnings that came ahead of market expectations.

The company reported Q1 revenue of $67.1 million, topping the analyst consensus of $64.2 million. RENT posted an adjusted EBITDA loss of $8.8 million in the period, compared to the estimated loss of $10.7 million. The e-commerce business reported 134,998 active subscribers in the quarter, more than analyst estimates of 131,320.

Looking ahead to Q2, RENT expects revenue in the range of $72 million to $74 million, compared to the analyst estimates of $71 million. The adjusted EBITDA loss is expected to range between $3 million and $4 million, while analysts were estimating $5.33 million.

For FY23, RENT expects revenue to be in the range of $295 million to $305 million, while analysts were looking for $304.1 million. The FY23 adjusted EBITDA is expected to be down -5% to -6%.

“We are reiterating our outlook of 45%-50% YoY revenue growth in fiscal year 2022, and our target of Adjusted EBITDA breakeven in the next 2-4 quarters, while progressing towards our top priority of free cash flow breakeven in the midterm,” CFO Scarlett O’Sullivan said.

Morgan Stanley (NYSE:MS) analyst Lauren Schenk cut the price target to $14.00 per share from $22.00.

“RENT delivered a 1Q beat and maintained full year outlook... rare in this environment, but also with the added benefit of conservatism baked in, we think. Continued solid execution and investor education should drive the stock to better reflect fundamentals over the medium-term,” Schenk told clients in a note.

Piper Sandler analyst Abbie Zvejnieks slashed the price target by nearly 50% to $12.00 to reflect “current market conditions.”

“RENT beat on the top and bottom line led by strong subscriber growth. With only 13% of revenue spent on marketing, subscribers grew 82% y/y to 135k. Return to events such as weddings and return to office should be tailwinds for continued subscriber growth, and we believe there is an opportunity for significant operating expense leverage as the business scales. We think the value proportion of rental would be relevant in a potential declining consumer environment,” Zvejnieks told clients in a note.

By Senad Karaahmetovic