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1. Company Snapshot

1.a. Company Description

The RealReal, Inc.operates an online marketplace for consigned luxury goods in the United State.It offers various product categories, including women's, men's, kids', jewelry and watches, and home and art products.


The company was incorporated in 2011 and is headquartered in San Francisco, California.

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1.b. Last Insights on REAL

The RealReal's recent performance was negatively impacted by a Q1 loss of $0.14 per share, exceeding the Zacks Consensus Estimate of a loss of $0.13. The company's inability to meet revenue estimates, despite double-digit revenue growth, is a concern. Additionally, the stock's high valuation, trading at 36x EV/FY25 adjusted EBITDA, necessitates significant margin improvements and stable revenue growth to justify. Furthermore, the company's razor-thin profit margins and high operational costs are major drawbacks, weighing on its performance.

1.c. Company Highlights

2. The RealReal's Q3 Results Show Strong Growth and Expanding Margins

The RealReal reported a 20% year-over-year growth in GMV to $520 million, with adjusted EBITDA of $9.3 million, or 5.4% of total revenue, representing a 380 basis point improvement. The company's EPS came in at -$0.49, missing estimates of -$0.06063. Direct revenue grew 47%, and gross margins expanded by 370 basis points to 21%. The company's growth is driven by its expertise, data-driven sales team, and diverse product offerings, which are considered its strategic moats.

Publication Date: Nov -17

📋 Highlights

Operational Efficiencies and Growth Drivers

The company is driving operational efficiencies through AI-enabled product intake process, Athena, which processed 27% of all items in Q3 and is expected to reach 30-40% of inventory by the end of the year. The company expects to see cost savings of a couple of dollars per item as it continues to roll out Athena. The growth playbook focuses on unlocking high-quality supply through data and consignor relationships, with a new compensation plan for the sales team and AI-driven tools.

Marketing Efforts and Customer Trust

Marketing efforts are scaling the active consignor base and reinforcing brand authority, with a focus on attracting "flywheelers" who participate in both sides of the marketplace. The company has seen double-digit consignor growth and is building trust with its community of 40 million members, with a customer trust metric up 8 points year-over-year.

Valuation and Outlook

With a P/S Ratio of 6.05 and an EV/EBITDA of 7052.59, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 11.0%. The company expects to continue to see operating efficiencies, particularly in ops and tech, where it sees leverage coming from AI-driven initiatives like Athena. The company is on track to take outright multiple dollars in cost per unit in the medium term, with a focus on driving growth and building its business.

Cash Flow and Balance Sheet

The company generated $19 million in operating cash flows and $14 million in free cash flow in Q3, primarily from investments in automation tech and technology like Athena in its fulfillment centers. The company expects Q4 to be stronger, showcasing the positive working capital benefits of its business model. The company plans to continue to use its cash efficiently, with no plans to trap cash purchasing inventory ahead of the season.

3. NewsRoom

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CFO and Other Executives Dump Thousands of RealReal Shares

Nov -28

Source: fool.com

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CFO and Other Executives Dump Thousands of RealReal Shares

Nov -26

Source: fool.com

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The RealReal Announces Upcoming Investor Conference Schedule

Nov -24

Source: globenewswire.com

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Real Matters Inc. (REAL:CA) Q4 2025 Earnings Call Transcript

Nov -20

Source: seekingalpha.com

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Real Matters Reports Fourth Quarter and Fiscal 2025 Financial Results

Nov -20

Source: globenewswire.com

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A market shift happening in the way people are clothes shopping: The RealReal CEO Rati Sahi Levesque

Nov -11

Source: youtube.com

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Why The RealReal Stock Soared Today

Nov -11

Source: fool.com

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These Analysts Boost Their Forecasts On RealReal Following Better-Than-Expected Q3 Results

Nov -11

Source: benzinga.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.59%)

6. Segments

Consignment

Expected Growth: 8.5%

The RealReal's consignment segment growth of 8.5% is driven by increasing demand for luxury goods, expansion into new markets, and strategic partnerships. Additionally, the company's focus on authentication, quality control, and customer service has led to higher customer retention and repeat business, contributing to the segment's growth.

Direct

Expected Growth: 9.5%

The RealReal's 9.5% growth is driven by increasing demand for luxury consignment, expansion into new markets, and strategic partnerships. Additionally, the company's focus on authentication, quality control, and customer experience has led to strong brand loyalty and repeat business. Furthermore, the shift towards online shopping and sustainability has also contributed to the company's growth.

Shipping Services

Expected Growth: 8.0%

The RealReal's Shipping Services segment growth of 8.0% is driven by increasing demand for luxury consignment, expansion into new markets, and strategic partnerships. Additionally, investments in logistics and technology have improved operational efficiency, enabling faster and more reliable shipping. Furthermore, the rise of e-commerce and growing consumer preference for online shopping have contributed to the segment's growth.

7. Detailed Products

Consignment

The RealReal's core business, allowing individuals to consign their luxury goods to be sold on the platform, with the company taking a commission on the sale price.

Direct Sales

The RealReal sells a curated selection of luxury goods directly to customers, often at discounted prices, through its e-commerce platform and physical stores.

Services

The RealReal offers various services, including appraisal, authentication, and valuation of luxury goods, as well as repair and restoration services.

Home and Fine Art

The RealReal sells a curated selection of luxury home decor, fine art, and collectibles, often sourced from high-end estates and auctions.

Gemology and Jewelry Services

The RealReal offers gemology services, including diamond and gemstone grading, as well as jewelry repair and restoration services.

8. The RealReal, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The RealReal is medium because while there are some substitutes for luxury consignment shopping, such as traditional retail or online marketplaces, The RealReal's focus on authenticity and quality sets it apart.

Bargaining Power Of Customers

The bargaining power of customers is high because customers have many options for luxury consignment shopping and can easily switch to competitors if they are not satisfied with The RealReal's prices or services.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low because The RealReal is a large and established company, and suppliers are likely to want to do business with them. Additionally, The RealReal has a strong brand and can negotiate favorable terms with suppliers.

Threat Of New Entrants

The threat of new entrants is medium because while it is possible for new companies to enter the luxury consignment market, there are significant barriers to entry, such as building a strong brand and establishing relationships with suppliers.

Intensity Of Rivalry

The intensity of rivalry is high because the luxury consignment market is highly competitive, with many established players competing for market share. The RealReal must continually innovate and improve its services to stay ahead of the competition.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 279.24%
Debt Cost 3.95%
Equity Weight -179.24%
Equity Cost 18.65%
WACC -22.41%
Leverage -155.79%

11. Quality Control: The RealReal, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Brilliant Earth

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Growth: 5.4

Quality: 6.6

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Momentum: 6.0

Volatility: 1.3

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Movado

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Envela

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Quality: 6.1

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Value: 6.0

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Quality: 4.2

Yield: 6.0

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Volatility: 6.3

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A-Score: 4.8/10

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Growth: 3.4

Quality: 3.8

Yield: 9.0

Momentum: 3.0

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The RealReal

A-Score: 4.6/10

Value: 6.4

Growth: 5.9

Quality: 3.9

Yield: 0.0

Momentum: 10.0

Volatility: 1.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

-13.9$

Current Price

13.98$

Potential

-199.44%

Expected Cash-Flows