Product authenticity remains a critical concern for The RealReal (REAL, Financial), but a new report from J Capital raises significant doubts about the company's ability to maintain high standards. The research suggests that the company's authentication process is allowing counterfeit goods to pass through, causing frustration among both buyers and sellers.
According to J Capital, the business model of REAL may be inherently flawed. They argue that as the company scales to a level necessary for profitability, the likelihood of fake items entering the system becomes almost unavoidable. This claim poses substantial challenges for REAL, which relies heavily on the trust and satisfaction of its customer base to succeed in the competitive market of luxury consignment.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for The RealReal Inc (REAL, Financial) is $10.00 with a high estimate of $15.00 and a low estimate of $7.00. The average target implies an upside of 76.68% from the current price of $5.66. More detailed estimate data can be found on the The RealReal Inc (REAL) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, The RealReal Inc's (REAL, Financial) average brokerage recommendation is currently 2.3, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for The RealReal Inc (REAL, Financial) in one year is $2.47, suggesting a downside of 56.36% from the current price of $5.66. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the The RealReal Inc (REAL) Summary page.
REAL Key Business Developments
Release Date: May 08, 2025
- Revenue: $160 million, increased 11% year over year.
- Gross Merchandise Volume (GMV): $490 million, increased 9% year over year.
- Gross Margin: 75%, improved by 40 basis points year over year.
- Adjusted EBITDA: $4.1 million, increased by $6.4 million compared to the prior year.
- Operating Expenses: $133 million, increased 6% year over year, with a 410 basis points improvement as a percentage of total revenue.
- Active Buyers: Increased 7% on a trailing 12-month basis to 985,000.
- Average Order Value: $564, up 5% year over year.
- Direct Revenue: Increased 61% compared to Q1 of 2024, with direct gross margins at 25.5%.
- Operating Cash Flow: Negative $28 million for the first quarter.
- Cash and Cash Equivalents: $154 million at the end of the quarter.
- Full Year GMV Guidance: $1.96 billion to $1.99 billion, up 8% year over year at the midpoint.
- Full Year Revenue Guidance: $645 million to $660 million, up 9% year over year at the midpoint.
- Full Year Adjusted EBITDA Guidance: $20 million to $30 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The RealReal Inc (REAL, Financial) reported a 9% increase in GMV and an 11% increase in revenue year over year, indicating strong top-line growth.
- The company achieved a positive adjusted EBITDA of $4 million, marking an increase of $6 million compared to the previous year.
- Active buyers increased by 7% on a trailing 12-month basis, demonstrating growing consumer engagement.
- The RealReal Inc (REAL) improved its gross margin by 40 basis points year over year, showcasing enhanced operational efficiency.
- The company successfully launched and expanded its AI-enabled product intake process, Athena, which reduced processing times by an estimated 20%.
Negative Points
- Operating cash flow for the first quarter was negative $28 million, indicating cash flow challenges.
- The company faces uncertainties from tariffs and a less predictable macroeconomic environment, which could impact future performance.
- Despite improvements, the direct revenue channel remains less profitable than consignment, which could limit overall margin expansion.
- The Get Paid Now program, while promising, is still in its early stages and not yet a significant contributor to revenue.
- The company has a convertible note of $27 million maturing in June, which could impact financial flexibility.
