Rent the Runway (RENT) AI Stock Analysis

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Rent the Runway

(NASDAQ:RENT)

50Neutral

Rent the Runway's overall score is affected by financial challenges, including high leverage and net losses, despite some improvements in cash flow and strategic initiatives. The technical analysis indicates weak momentum, and valuation metrics are unattractive due to a negative P/E ratio. While the earnings call reveals plans for growth through inventory investments, the risks of decreased subscribers and higher cash consumption weigh down the outlook.

Positive Factors

Revenue Performance

Rent the Runway reported 2Q24 revenue and EBITDA above the high end of guidance while reiterating guidance for breakeven free cash flow for 2024.

Subscriber Growth

Reserve and resale both grew 20%+, indicating positive trends for new subscriber growth.

Negative Factors

Market Potential

The lack of subscriber growth suggests a smaller total addressable market than initially believed at the IPO.

Rent the Runway (RENT) vs. S&P 500 (SPY)

Market Cap

$20.42M

Dividend YieldN/A

Average Volume (3M)73.64K

Price to Earnings (P/E)―

Beta (1Y)1.60

Revenue Growth2.68%

EPS Growth43.98%

CountryUS

Employees912

SectorConsumer Cyclical

Sector Strength64

IndustryApparel - Retail

Share Statistics

EPS (TTM)-3.44

Shares Outstanding3,726,752

10 Day Avg. Volume49,033

30 Day Avg. Volume73,635

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.07

Price to Cash Flow (P/CF)1.10

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$21.00

Price Target Upside388.37% Upside

Rating ConsensusHold

Number of Analyst Covering1

Rent the Runway Business Overview & Revenue Model

Company DescriptionRent the Runway (RENT) is an innovative fashion technology company that operates primarily in the clothing rental industry. The company offers a subscription-based model and one-time rental service that allows customers to rent designer apparel and accessories for a fraction of the purchase price. Rent the Runway aims to revolutionize the fashion industry by providing an accessible, sustainable, and flexible fashion experience, enabling consumers to access high-end fashion without the commitment of ownership.

How the Company Makes MoneyRent the Runway makes money through several key revenue streams. The primary source of revenue is its subscription service, where customers pay a monthly fee for access to a rotating selection of designer clothing and accessories. This model offers different tiers, providing varying levels of access and benefits based on the subscription plan chosen. Additionally, the company generates revenue from one-time rentals, where customers can rent individual items for a set period without a subscription. Rent the Runway also earns from the sale of clothing and accessories, particularly items that have been retired from the rental service. Another significant source of revenue comes from partnerships and collaborations with designers and brands, which can include co-branded collections or exclusive rental offerings. The company's innovative approach to inventory management, logistics, and technology also helps optimize costs and improve profitability.

Rent the Runway Financial Statement Overview

Summary

Rent the Runway faces substantial financial challenges with persistent losses and negative equity. While there are signs of revenue growth and improved operational cash flows, the firm remains highly leveraged with considerable financial risks.

Income Statement

Negative

Rent the Runway's TTM (Trailing-Twelve-Months) financials indicate significant challenges in profitability. The company reports a negative net profit margin and EBIT margin, reflecting ongoing losses. However, there is a slight improvement in revenue, with a 2.48% growth from the previous annual period. The gross profit margin improved to 51.72% TTM, showing some operational efficiency, though overall profitability remains a concern.

Balance Sheet

Negative

The balance sheet reveals substantial financial risks, with negative stockholders' equity indicating insolvency concerns. The company's debt-to-equity ratio is not meaningful due to negative equity, and high liabilities compared to assets emphasize financial instability. Return on equity is negative, further highlighting profitability issues.

Cash Flow

Neutral

Cash flow analysis shows some positive trends with operating cash flow turning positive in the TTM period. However, free cash flow remains negative, though it has improved compared to prior periods. The operating cash flow to net income ratio suggests some improvement in cash generation relative to accounting losses.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
305.60M	298.20M	296.40M	203.30M	157.50M	256.90M
	Gross Profit
158.10M	119.70M	204.20M	69.70M	-23.50M	20.60M
	EBIT
-58.90M	-80.00M	-50.20M	-62.80M	-130.50M	-130.00M
	EBITDA
32.50M	25.70M	-4.70M	-67.20M	-52.20M	-61.60M
	Net Income Common Stockholders
-81.30M	-113.20M	-138.70M	-211.80M	-171.10M	-153.90M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
19.93M	84.00M	154.50M	247.60M	95.30M	31.40M
	Total Assets
64.81M	278.50M	336.20M	447.50M	320.70M	275.90M
	Total Debt
0.00	356.60M	315.20M	312.80M	414.20M	261.90M
	Net Debt
-2.44M	272.60M	160.70M	65.20M	318.90M	230.50M
	Total Liabilities
13.58M	400.80M	371.50M	376.40M	847.40M	640.20M
	Stockholders Equity
51.23M	-122.30M	-35.30M	71.10M	-526.70M	-364.30M
Cash Flow		Free Cash Flow
-22.40M	-98.20M	-118.70M	-83.40M	-121.50M	-199.10M
	Operating Cash Flow
3.50M	-15.70M	-47.70M	-42.30M	-42.80M	-37.60M
	Investing Cash Flow
-35.80M	-54.60M	-44.30M	-22.50M	-58.40M	-138.60M
	Financing Cash Flow
-500.00K	700.00K	-4.00M	215.20M	168.50M	177.90M

Rent the Runway Technical Analysis

Technical Analysis Sentiment

Negative

Last Price4.30

Price Trends

50DMA

5.06

Negative

100DMA

6.96

Negative

200DMA

9.26

Negative

Market Momentum

MACD

-0.29

Positive

RSI

45.56

Neutral

STOCH

22.67

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RENT, the sentiment is Negative. The current price of 4.3 is below the 20-day moving average (MA) of 4.56, below the 50-day MA of 5.06, and below the 200-day MA of 9.26, indicating a bearish trend. The MACD of -0.29 indicates Positive momentum. The RSI at 45.56 is Neutral, neither overbought nor oversold. The STOCH value of 22.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RENT.

Rent the Runway Risk Analysis

Rent the Runway disclosed 62 risk factors in its most recent earnings report. Rent the Runway reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Rent the Runway Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	60 Neutral	$6.85B	11.57	3.09%	4.18%	2.37%	-21.38%
CURV	55 Neutral	$631.67M	39.07		―	-4.18%	39.43%
SFIX	52 Neutral	$422.45M	―	-34.37%	―	-13.14%	44.84%
RENT	50 Neutral	$20.42M	―	47.49%	―	2.68%	43.98%
ZUMZ	49 Neutral	$232.46M	―	-0.50%	―	1.57%	98.64%
TLYS	43 Neutral	$47.94M	―	-37.62%	―	-8.61%	-33.30%
LVLU	41 Neutral	$17.62M	―	-148.78%	―	-11.06%	-175.45%

* Consumer Cyclical Sector Average

Performance Comparison

RENT

Rent the Runway

4.15

-6.85

-62.27%

TLYS

Tilly's

1.59

-4.42

-73.54%

ZUMZ

Zumiez

11.88

-5.07

-29.91%

SFIX

Stitch Fix

3.35

1.19

55.09%

CURV

Torrid Holdings

6.10

1.10

22.00%

LVLU

Lulu's Fashion Lounge Holdings

0.41

-0.81

-66.39%

Rent the Runway Earnings Call Summary

Earnings Call Date: Apr 15, 2025 | % Change Since: -20.22% | Next Earnings Date: Jun 5, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted significant strategic investments in inventory and innovative customer engagement initiatives, indicating a focus on future growth and customer satisfaction. However, challenges such as decreased active subscribers and increased cash consumption forecast for 2025 present notable risks.

Highlights

Improved Cash Position

Rent the Runway significantly improved its cash position from a decline of $70.5 million in fiscal year 2023 to a decline of only $6.6 million at the end of fiscal year 2024, marking record low cash consumption.

Largest Inventory Investment in Company's History

In 2025, Rent the Runway plans to add two times new inventory units year-over-year, emphasizing a substantial investment to improve customer satisfaction and retention.

Significant Growth in Share by RTR Model

Share by RTR units are expected to increase to approximately 62% of total units in fiscal year 2025, a 2.5x increase versus fiscal year 2024, highlighting the success and popularity of the model.

Positive Adjusted EBITDA Growth

Adjusted EBITDA for fiscal year 2024 was approximately $46.9 million or 15.3% of revenue, up from $26.9 million or 9% of revenue in fiscal year 2023.

Strong Customer Service and Loyalty Initiatives

The company maintained a CSAT score between 80% and 90% over the past three years, and implemented new strategies for proactive customer engagement to drive loyalty.

Lowlights

Decrease in Active Subscribers

Ending active subscribers decreased by approximately 4.9% year-over-year, from 132,518 at the end of Q3 2024 to 119,778 at the end of Q4 2024, due to lower subscriber acquisitions.

Lower Gross Margins

Gross margins decreased from 39.4% in Q4 ‘23 to 37.7% in Q4 ‘24, impacted by higher revenue share costs as a percentage of revenue due to the greater proportion of Share by RTR inventory.

Increased Cash Consumption Forecast for 2025

The company expects full-year cash consumption to be between negative $30 million and negative $40 million in fiscal year 2025, primarily due to substantial inventory investment.

Company Guidance

During the Rent the Runway's fourth quarter and fiscal year 2024 earnings call, the company provided guidance for fiscal year 2025, focusing on a significant inventory investment intended to drive subscriber growth and improve customer loyalty. The company plans to double inventory purchases, with 62% of new inventory expected to come through their Share by RTR program, which allows inventory acquisition at zero or low upfront cost. Despite this investment resulting in anticipated cash consumption between negative $30 million and negative $40 million, Rent the Runway expects double-digit growth in active subscribers. The call highlighted fiscal year 2024's nearly break-even cash position, with adjusted EBITDA of $46.9 million or 15.3% of revenue, and a reduction in cash consumption from a decline of $70.5 million in fiscal year 2023 to $6.6 million in fiscal year 2024. The company projects a positive impact on cash flow beyond fiscal year 2025 as the inventory investment aims to enhance customer satisfaction and retention, leveraging a capital-light business model.

Rent the Runway Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Emil Michael Resigns from Rent the Runway Board

Neutral

Mar 5, 2025

On February 28, 2025, Emil Michael resigned from Rent the Runway’s Board of Directors, effective March 1, 2025, with no disagreements cited regarding company operations. Additionally, on February 27, 2025, the Board’s Compensation Committee approved a cash retention bonus program for fiscal year 2025, aimed at incentivizing executive officers and other eligible participants based on company performance metrics and continued service.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.