Online fashion retailer Revolve Group (NYSE:RVLV) is like the kid who didn’t get invited to the party. While some other e-commerce names have brought substantial returns, RVLV stock was excluded from the rally this year.
It just goes to show that sometimes, a rising tide doesn’t lift all boats. Or maybe it does lift all boats, but just not all at the same time. Is it possible that the Revolve revolution is in progress, yet not fully priced into the shares?
Perhaps it takes a fashion-forward mind to see the potential in RVLV stock. That’s why visionary investors might want to consider Revolve as an intriguing, albeit indirect, e-commerce wager.
A Closer Look at RVLV Stock
Not everything “revolves” around price action, but RVLV stock certainly has a noteworthy history. InvestorPlace Markets Analyst Luke Lango’s on-point summary bears repeating as the stock “popped from an $18 initial public offering (IPO) price to a nearly $50 price tag in just a few weeks. Then things went south.”
And indeed, southbound it was. A dream-demolishing decline from $50 in June 2019 to a mere $7.17 in March 2020 ensued. It’s a textbook example of why I often advise eschewing IPO hype and instead wait for the price to settle.
The onset of the novel coronavirus made it difficult for RVLV stock to establish a range during the first half of this year. However, things appear to be changing. RVLV stock is flirting with a range between $15-$18.
Since there’s no dividend, shareholders will want to see a pick-up in the volume and more movement in the price. And by “movement” I mean a breakout above $18, which could bring more investors into the fold.
The billion-dollar question here is: Why would RVLV be so late to the e-commerce party? It’s baffling since online sales boomed for many businesses as lockdowns forced people to stay indoors.
Actually, e-commerce was doing quite well even before the shelter-in-place mandates commenced. Revolve in particular was reaping tremendous benefits from the public’s shift toward online shopping.
Revolve co-founder and co-CEO Mike Karanikolas offers a couple of data points in support of this contention:
“We began the first quarter strong with net sales for January and February combined increasing by more than 20% year-over-year and with our inventory turning approximately 20% faster year-over-year…”
Then came the pandemic, and Revolve’s net sales decreased sharply in March’s final weeks. Yet, judging by the price action in RVLV stock, the coronavirus crisis seems to have impacted Revolve harder than other e-commerce names. What gives?
An Anti-Social Issue
To a certain extent, Revolve has relied on social events to drum up business. Unfortunately for the company, the pandemic meant that the Revolve Festival, which is Revolve’s most important company event, had to be postponed this year.
Other live events have also been postponed, so Revolve has lost a significant promotional avenue for the time being. For a retailer that tends to emphasize the shopping experience rather than just the actual products, the loss of social opportunities means fewer chances to build brand awareness and to connect with current and prospective customers.
Thankfully, if this is Revolve’s major roadblock, then it’s probably a temporary one. The pandemic-induced restrictions won’t last forever, and Generations Y and Z are itching to get out and socialize.
The Bottom Line
To be honest, Revolve will need some time to turn its situation around. There’s no way to pinpoint an exact date for an upcoming breakout in RVLV stock.
Nonetheless, it’s conceivable that the market will recognize that Revolve’s problems are likely temporary. If and when that happens, don’t be surprised if traders swiftly bid up the RVLV share price.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.