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Revolve's Influencer Strategy Helps Draw Slew of Buy Ratings

The clothing company was rated highly by Wall Street analysts, as shares rise by 7.3 percent.
Song of Style x Revolve | Source: Courtesy
By
  • Bloomberg

CERRITOS, United States — The end of Revolve Group Inc.'s quiet period was met with a chorus of buy ratings from Wall Street, with only one analyst straying from the pack. And even he praised the fashion e-tailer, but cited worries over valuation for his hold-equivalent rating.

The analysts widely cited Revolve’s financial performance, influencer marketing strategy and opportunities to expand internationally as key differentiators and growth drivers. "Revolve is the future of retail and brand marketing with its digital commerce platform built on a data-driven backbone and an enviable influencer ecosystem," Jefferies analyst Randal Konik wrote.

In all, Bloomberg data showed nine analysts coming forward with ratings on Revolve, with eight buys and one hold. The stock climbed as much as 7.3 percent Tuesday to $35.19 per share, nearly 96 percent above its initial public offering price of $18.

Here’s a round-up of what analysts are saying about Revolve.

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Jefferies, Randal Konik

“We see Revolve’s growth and market share gains in the first inning.”

Stock has upside to $60 or higher, based on: low market share with large total addressable market; strong margins that are likely to head higher; platform flywheel that drives new and existing customer site traffic; proprietary systems drive efficiency.

“Proprietary systems and algos help curate assortments, effectively target new and existing customers, and predict trends."

Rates buy, has a Street-high price target of $60

Cowen, Oliver Chen

“Revolve is well-positioned to grow its active user base as it captures fashion-focused Millennial and Gen-Z shoppers through its on-trend assortment, its influencer-based marketing model, and its emphasis on experiential events to promote the brand.”

“Revolve’s data-driven foundation and proprietary technology entrench the business versus both digitally native and brick-and-mortar competitors within the fashion retail space.”

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Sales are growing in the +20 percent range, margins are expanding via “owned brand penetration growth and ongoing operating leverage opportunities,” and EPS growth is expected in the +30 percent range.

Rates outperform, price target $42

Guggenheim, Robert Drbul

“Revolve is well-positioned to drive continued top-line growth of greater than 20%, with increasing profitability, primarily through Active Customer growth and a thriving portfolio of Owned Brands.”

Revolve has “some of the most attractive growth opportunities across our coverage.” Growth drivers include:

  • Expectation that Revolve will continue to drive strong customer acquisition growth (active customers have doubled since 2015)
  • Focus on increasing share of wallet and loyalty through various initiatives, including loyalty programs
  • Revolve's Owned Brands are "highly profitable" and are the company's "most attractive growth opportunity"
  • The company will look to further broaden both its product offering (Men's, Accessories, etc.) and its international presence

Rates buy, price target $50

William Blair, Ralph Schackart

A “differentiated fashion e-tailer positioned for sustained growth.”

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“Revolve has several upside opportunities to augment its business model and increase its share of the global online apparel, accessories, and beauty market.” These include:

  • More aggressive global expansion; less than 20% of the company's net sales care international
  • Owned brand penetration is increasing
  • More aggressive cross-sell of Revolve customers into the company's luxury Forward business
  • Newer categories, including beauty, low price, and men's, attract new customer segments
  • Loyalty program

Rates outperform (firm does not assign price targets).

Raymond James, Aaron Kessler

Positive investment thesis based on:

  • Large fashion market that is increasingly shifting online driven by next-Gen consumers
  • Revolve has established itself as a leading fashion brand for Millennials
  • Social and influencer marketing strategies are driving strong growth and cost efficiently
  • Successful owned brands strategy driving strong growth at high gross margins
  • Raymond James expects 20 percent + long-term growth and mid-teens or higher long-term Ebitda margins

Rates outperform, price target $40.

Barclays, Ross Sandler

Rates equal-weight, price target $32.

“The only thing that gives us temporary pause is the 50 percent + premium to the fashion e-commerce peers with similar growth and margin profiles.”

“The company’s profitable-since-inception and methodical-growth approach is a welcome contrast to what we typically see from e-commerce.”

By Janet Freund; editors: Catherine Larkin and Will Daley.

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