Wall Street analysts are starting their coverage on luxury consignment platform The RealReal (REAL), and so far, most are bullish on the stock.
Cowen analyst Oliver Chen initiated The RealReal at Outperform with a price target of $32, which implies a 30% upside, on the belief that the company’s premium specialization yields a bigger and better customer experience.
“The RealReal is the largest online luxury resale platform that consigns and sells second-hand luxury items at 14% share. A key aspect of REAL’s success is its scale, creating and perpetuating competitive advantages that are difficult to replicate,” Chen wrote in a note to investors on Tuesday.
He laid out four main competitive advantages that distinguish The RealReal: 1) advanced supply gathering capabilities and reach, 2) sophisticated logistics and fulfillment infrastructure & authentication, 3) advanced data analytics, 4) high sales velocity and sell-through rates.
Cowen estimates that the current U.S. luxury resale market is worth about $7 billion, and notes that about half of that is attributable to online resale players. The firm expects the luxury resale market to grow by more than 50%, to $11 billion, by 2022.
Despite his optimism, one of the main risks to The RealReal’s story continues to be whether it will become profitable. When it filed its S1 with SEC in May, The RealReal disclosed that it had a history of losses, and it may not achieve or maintain profitability in the future.
Other analysts initiated coverage as follows:
Bank of America Merrill Lynch: Neutral, $28 price target
Credit Suisse: Outperform, $30 price target
KeyBanc: Overweight, $31 price target
Raymond James: Market perform
Stifel: Buy, $30 price target
UBS: Buy, $30 price target
Pamela Granda is a producer on Yahoo Finance’s closing bell show, The Final Round. Follow her on Twitter.