“Tremendous Value” or Trap? Rent the Runway (NASDAQ:RENT) Stock Crashes Amid So-Called Recovery
Fashion-forward investors got a brutal reality check as Rent the Runway’s stock nosedived—proving once again that ''disruption'' doesn’t always mean profits.
Subheader: The Illusion of Recovery
Wall Street’s latest darling-turned-disappointment shows even a rebound narrative can’t save a business model that burns cash faster than a influencer’s paycheck. The numbers don’t lie—this wasn’t a dip, it was a full-blown faceplant.
Subheader: When ''Tremendous Value'' Turns Toxic
Analysts hyped the turnaround story, but the market wasn’t buying it (literally). Another cautionary tale for those chasing ''the next big thing'' while ignoring fundamentals. But hey, at least the short sellers are having a field day.
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Rent the Runway has made some substantial gains in recent months. Things did not go well to start out the year, as it hit what reports called a “multiyear low.” But it came roaring back thanks to a surging subscriber count, and now, around 147,000 people are renting their high-fashion clothes from places like Gucci and Oscar de la Renta. Part of this is seasonal; formal wear often comes into vogue with graduations, proms and weddings. But the seasonal boost seems to be sticking around as the latest count is up higher than normal.
With rental packages running between $100 and $315 per month, there is a certain use case for such things. As Thacker put it, “Customers are getting thousands of dollars worth of clothing for around $100-plus per month.” And indeed, the prospect was sufficiently tempting to pull a whole other business into the market.
Meet Nuuly
The idea that Rent the Runway might have a viable market here is not out of line. After all, it even has competition in the FORM of Nuuly, which currently has double the subscriber count of Rent the Runway. In fact, most of Nuuly’s customers in the under-30 bracket are actually first-time renters.
But perhaps more disturbing for Rent the Runway is the unexpected tidbit that Nuuly has a 90% retention rate in customers’ first year. By the end of year five, that number dwindles to just 40%. That means that once a Nuuly subscriber is in, it is a near-certainty they will stay for a year, and roughly, a coin flip they will stay through year five. That demonstrates, pretty clearly, that there is a market for this sort of thing.
Is Rent the Runway Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on RENT stock based on one Hold from Citizens JMP analyst Andrew Boone, who has a four and a half-star rating on TipRanks, as indicated by the graphic below. After a 70.93% loss in its share price over the past year, the RENT price target of $21 per share implies 319.96% upside potential.
Disclosure
