The RealReal, Inc.

The RealReal, Inc. (NASDAQ: REAL) is the luxury resale platform in the United States, with a gross merchandise volume of USD 1.48 billion in FY21 and a personal luxury resale traditionally served by inefficient upmarket boutiques and local pawn shops. The company makes money from its online marketplace and direct sales at its physical locations.

Key Highlights:

• Increase in Revenue: The company has posted revenue of USD 146.7 million in Q1 FY22 against USD 98.82 million in Q1 FY21.
• Losses Expanded: Due to rising operations and technological expenditures, the firm reported a net loss of USD 57.41 million in Q1 FY22, up from USD 55.99 million in Q1 FY21.
• Leveraged Balance Sheet: Long-term debt to total capital was 118.3% in Q1 FY22, compared to the industry norm of 3.5%, indicating a risky liquidity situation. However, cash was USD 361.00 million as of March 31, 2022. Furthermore, REAL reported negative profit margins and negative returns on equity, raising concerns about shareholders' value.
• Steep Bearishness in the Stock: REAL shares have fallen sharply over the last one year, hovering far below critical long-term and short-term support levels of 200-day, 100-day, 50-day, and 20-day SMAs, indicating a bearishness in the stock. REAL shares have also violated all critical supports on the weekly price chart and persistently declined.

Stock Recommendation

Considering the rise in revenue, continued losses, leveraged balance sheet, and bearish technical indicators, we recommend a "Watch" rating on the stock at the closing price of USD 3.74, up 0.27% as of May 16, 2022.

REAL’s Technical Price Chart (as of May 16, 2022). Source: REFINITIV, Analysis by Kalkine Group 

  Technical Summary

*Closing Price as of May 16, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.