By most measures, fashion-sharing platform Rent the Runway (NASDAQ:RENT) represents a risky endeavor. Nevertheless, because of the radical changes in the workplace, the company could continue rising on greater demand for a broader wardrobe upgrade. Moving forward, both the return to the office and desperate job hunting may cynically lift the sharing e-commerce service. Therefore, I am cautiously bullish on RENT stock.
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As an op-ed from The Washington Post declared in December 2020, Americans incurred their pajama moment. Quarantined from the office and each other, mainly white-collar workers adjusted to the new reality of COVID-19. Gone were the stuffy suits, ties, and blouses. In were casual, comfy athletic wear. If anything, a requested conference call would only require presentability from the waist up.
Perhaps not surprisingly, then, when RENT stock made its public market debut in October 2021, it quickly plummeted. While the so-called sharing economy presents relevance for Rent the Runway, consumers lacked incentivization. Why bother dressing up – and paying for such – when you’ll be stuck at home anyways?
However, with COVID-19 fears fading away, employers began questioning the necessity for remote operations. Further, enterprises like Disney (NYSE:DIS) squashed their work-from-home privileges. More than likely, other enterprises will follow suit.
Without a global health crisis, employers have no need to facilitate the telecommuting privilege. As well, the fundamental reality is that a lack of accountability leads to corruption. Indeed, employers have no real way of knowing what their workers are doing, thus driving the back-to-office push.
Therefore, should the professional environment return to pre-pandemic norms, people will need to improve their presentability. This should bode well for RENT stock.
The Great Job Hunt May Lift RENT Stock
While recalled workers may moan and complain about their lot in life, this fate ranks much better than the other alternative — losing one’s job altogether. Unfortunately, this has become part of the new normal for workers drawing the short end of the stick. Cynically, though, the subsequent great job hunt may help RENT stock move higher.
While the technology sector suffered the brunt of the damage, several other enterprises across the economic spectrum implemented both layoffs and hiring freezes. Under an environment of rising borrowing costs, the associated loss of business forced many firms to cut overhead expenses. Letting go of workers offers a relatively quick answer.
For RENT stock, the investment profile can swing higher based on two catalysts: number one, the layoffs themselves, and number two, the scope of the job axing. In other words, with limited opportunities available – particularly in tech – the recently unemployed must put their best foot forward. That means shoring up everything, from the resume to letters of recommendation to, yes, even the wardrobe.
As the old saying goes, you never get a second chance to make a first impression. Naturally, this framework should benefit RENT stock during these trying times.
A Tough but Potentially Viable Enterprise
Although RENT stock may enjoy a compelling narrative, the problem centers on convincing investors to take a shot. Glancing at the financials, Rent the Runway has a long road ahead to profitability. As well, with a poor balance sheet, this is an unusually risky profile at the moment.
However, with shifting circumstances favoring RENT stock, the financials can eventually catch up. For instance, Rent the Runway suffered expanding net losses throughout the first two years of the COVID-19 pandemic. Obviously, with workers still mostly telecommuting, a wardrobe upgrade wasn’t necessary.
However, on a trailing-12-month basis, its net loss of $151.8 million sits conspicuously lower than the red ink posted for the fiscal year ended January 2022 ($211.8 million). As employers started recalling their workers and as society, in general, started normalizing, Rent the Runway’s service became more attractive. Over time, the speculation is that this trend will continue, thus bolstering RENT stock.
Is RENT Stock a Buy, According to Analysts?
Turning to Wall Street, RENT stock has a Moderate Buy consensus rating based on four Buys, two Holds, and zero Sell ratings. The average RENT stock price target is $5.30, implying 21.6% upside potential.
The Takeaway: RENT Stock is Entering Its Relevancy Phase
Undoubtedly, Rent the Runway presents a challenging and perhaps dangerous investment. Still, the ugliness in the company’s financials symbolizes a moment in time. Fortunately for bullish speculators, the winds are changing rapidly.
During the worst of COVID-19, no one needed a wardrobe upgrade. As the workplace emerges out of quarantine, people need said upgrade as a matter of necessity. Therefore, risk-tolerant investors may want to consider throwing a few pennies at RENT stock.
