Raymond James downgraded Revolve Group LLC (NYSE:RVLV) to a Market Perform rating (From: Outperform) and removed their price target on the stock after the Digital Commerce company reported weak 1Q results.
Revolve reported 1Q revenues down 1% y/y, compared to the street’s estimate of 2% growth y/y. RVLV’s EBITDA margin was reported at -575bp, compared to the Street’s -515bp estimate.
The firm wrote in a note, “We previewed expectations for decelerating trends that began in early 1Q to continue (also evident in our Mobile App checks). But results reflected a steeper softening than we expected; in 2Q, April is -7% y/y. While y/y comparisons get easier for the rest of 2Q and 2H, RVLV’s target customers appear to be getting more defensive (ongoing trade down, Return Rate ticking higher). On the plus side, excess inventory should be right-sized by end of 2Q, transitory cost headwinds (freight, fuel surcharges) should become tailwinds and pockets of international (incl China are positive). We believe RVLV has attractive LT drivers but without consistency & better visibility on the trendline for demand, it’s difficult to have high-conviction on near-term projections, prompting us to move to the sidelines”.
Raymond James lowered 2023/2024 revenue estimates to -3%/+8% (vs. +7%/+13% prior). EBITDA estimates were cut to $54M/$90M (vs. $85M/$105M prior) and EBITDA margins of 5.0%/7.8% (vs. 7.3%/7.9% prior).
Shares of RVLV are down 7.9% in mid-day trading on Thursday.
By Michael Elkins | Michael.Elkins@streetinsider.com