Rent The Runway (RENT): The New Normal For Designer Fashion

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The world economy is reemerging from the depths of the pandemic with a digitalized ambition like we’ve never seen before as we enter the 4th Industrial Revolution.

– Zacks

Social gatherings/events are back in action, and attendees are looking to reemerge from their lockdown holes with a diverse fashionable impression that Rent The Runway’s RENT niche digital offering can deliver. This subscription-based platform provides women with a wide assortment of the latest designer fashions, which can be „rented“ for upcoming events.

With a slew of holiday celebrations and post-COVID social outings on the horizon, RENT is poised to explode as society enters a digitally-inclined new normal.

Rent The Runway (RENT) immediately plunged from its IPO price last month, and continues to slump (now trading 30% below its $23 IPO price), creating an excellent opportunity for us to get in on this nascent digital retail niche of the future before it takes flight. Several leading analysts released very bullish initiation of coverage reports on RENT in the past 48 hours, with price targets ranging from $20 to $28 (representing an upside of 25% to 75%). Every covering analyst is calling the stock a buy today.

This signal of confidence from some of the most trusted sell-side analysts should supply this stock with the green light it needs for deep-pocket money managers to start buying this still small-cap equity.

Most fund managers didn’t initially understand this budding trend in feminine fashion, and the COVID-related subscription drop-off from a growth-oriented tech company is a red flag to those who don’t recognize the value proposition of this next-generation retail platform offers.

RENT will be releasing its first earnings report as a public company after the bell on Wednesday December 8th, which should generate a nice slingshot price action if RENT reveals the continued margin enhancing subscription growth narrative that its exhibited in the wake of the pandemic’s lockdown trough.

Rent The Runway is coming out of this pandemic with margin expanding operational improvements and customer loyalty that it hadn’t been able to achieve prior. Active subscribers nearly doubled in the first half of 2021 to 97,614 as of the end of July, still shy of the 133,576 it had pre-pandemic. However, with operating margins now toeing profitability and evident growth acceleration, RENT is a steal at the 5x forward price-to-sales it’s trading at.

It’s time to invest in the new normal. RENT is perfectly positioned for society’s digitally inclined revival, and its under-the-radar profile makes this growth-oriented stock a value play today.

Happy Trading!

Dan

For more headline-fueled trades and insight, checkout my daily market commentary of the Headline Trader portfolio.

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