Shares of Rent the Runway (NASDAQ:RENT) closed 36.28% higher on Wednesday, April 10. Further, RENT stock gained over 58% in after-hours trading. This big jump in RENT stock came after the company released its Q4 financials. The online platform that enables its users to rent, shop, or subscribe to designer clothing managed to cut losses during the quarter. Moreover, the company’s leadership expects to achieve a free cash flow breakeven in Fiscal 2024, boosting investors’ sentiment.
The company delivered revenue of $75.8 million in Q4, up 0.5% year over year. Its top line exceeded Street’s forecast of $74.5 million. RENT reported a net loss of $24.8 million in Q4, compared to a loss of $26.2 million in the prior year quarter. While it managed to lower losses, its loss per share of $7.02 was wider than the Street’s forecast of $5.34.
Management Remains Optimistic About RENT
The company’s management remained upbeat and sees FY24 as a transformative year. Rent the Runway has managed to reduce fixed costs, and it is transitioning towards a capital-light business model. As a result of these initiatives, the company expects to reach a free cash flow breakeven point in FY24.
The company has introduced a premium personal concierge service and is optimistic about its marketing endeavors. However, weak clothing demand amid macro headwinds remains a concern.
Notably, RENT expects its Q1 sales to be in the range of $73 million to $75 million. This fell short of analysts’ estimate of $76 million. As for FY24, the company expects its top line to increase by 1-6%, compared to analysts’ growth forecast of 5%.
Is Rent the Runway Stock a Buy?
Notably, JMP Securities analyst Andrew Boone reiterated a Buy rating on Rent the Runway stock on April 11. His price target of $20 suggests a significant upside potential of more than 170% from current levels.
The company’s cost-cutting measures, product innovation, focus on customer retention, and shift towards an asset-light model are expected to bolster its financial performance. However, the decline in its active subscriber base in Q4 and ongoing macro headwinds remain a concern in the short term.
Investors should note that RENT stock has lost nearly 87% of its value over the past year. Moreover, it announced a 1-for-20 reverse stock split to avoid delisting from the exchange.
