Rent the Runway (RENT) AI Stock Analysis

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Rent the Runway

(NASDAQ:RENT)

Rating:47Neutral

Price Target:

$5.50

▲(2.61%Upside)

Rent the Runway's financial challenges, characterized by negative profitability and a leveraged balance sheet, are significant downsides. Technical analysis shows mixed signals, and valuation metrics are weak due to unprofitability. However, strategic investments in subscriber growth and inventory, coupled with recent board changes, provide some positive 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. SPDR S&P 500 ETF (SPY)

Market Cap

$22.40M

Dividend YieldN/A

Average Volume (3M)147.69K

Price to Earnings (P/E)―

Beta (1Y)2.26

Revenue Growth0.60%

EPS Growth36.38%

CountryUS

Employees912

SectorConsumer Cyclical

Sector Strength58

IndustryApparel - Retail

Share Statistics

EPS (TTM)-6.15

Shares Outstanding3,866,254

10 Day Avg. Volume328,927

30 Day Avg. Volume147,689

Financial Highlights & Ratios

PEG Ratio0.00

Price to Book (P/B)-3.46

Price to Sales (P/S)0.00

P/FCF Ratio-6.34

Enterprise Value/Market Cap66.62

Enterprise Value/Revenue1.23

Enterprise Value/Gross Profit6.84

Enterprise Value/Ebitda5.87

Forecast

1Y Price Target

$21.00

Price Target Upside291.79% Upside

Rating ConsensusHold

Number of Analyst Covering1

Rent the Runway Business Overview & Revenue Model

Company DescriptionRent the Runway, Inc. rents designer wear for women through its stores and online retail. The company offers ready-to-wear, workwear, denim, casual, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, ski wear, home goods, evening wear, and kids wear, as well as accessories. It also engages in the software development and support activities. The company was incorporated in 2009 and is headquartered in Brooklyn, New York.

How the Company Makes MoneyRent the Runway generates revenue primarily through its subscription-based model and individual rental services. The company offers multiple subscription tiers, allowing members to rent a set number of items per month for a recurring fee. Additionally, customers can choose to rent items for a short-term period without a subscription, providing flexibility in usage. Rent the Runway also monetizes through the direct sale of pre-worn items from its inventory, catering to consumers interested in owning designer pieces at a reduced price. Strategic partnerships with designers and fashion brands enable Rent the Runway to maintain a diverse and appealing selection, further driving customer engagement and retention.

Rent the Runway Earnings Call Summary

Earnings Call Date:Jun 05, 2025

(Q1-2025)

% Change Since: -20.47%|

Next Earnings Date:Sep 05, 2025

Earnings Call Sentiment Neutral

Rent the Runway, Inc. has experienced record subscriber growth and strong customer retention due to significant inventory expansion and the introduction of new features. However, revenue decline, increased fulfillment costs, decreased gross margins, and negative adjusted EBITDA highlight financial challenges. Despite these issues, the company is optimistic about its transformation strategy and future growth.

Q1-2025 Updates

Positive Updates

Record Subscriber Growth

Ended Q1 with over 147,000 active subscribers, the most in company history. Achieved the fastest sequential growth in ending active subscribers in Q1 versus Q4 over the last four years.

Strong Customer Retention

Strongest quarterly customer retention in four years, with improved churn rates for both early-term and long-term subscribers.

Significant Inventory Expansion

Q1 inventory volume received was up 24% year over year. Plans for further expansion include Q2 new receipts expected to be up over 420% year over year, and for the rest of the year, new receipts to be up 134% year over year.

Introduction of New Features

Launched back-in-stock notifications and personalized styling support, resulting in a 27% reduction in first-month churn.

Successful Marketing and Engagement

Social engagement rate increased by 163% following a new organic strategy. Hosted various successful member-first experiences.

Positive Customer Feedback

Customers are more engaged with the selection than ever before, with spring 2025 inventory having a 23% higher share of use and 46% more hearts.

Negative Updates

Revenue Decline

Q1 2025 revenue was $69.6 million, down 7.2% year over year and 8.9% quarter over quarter.

Higher Fulfillment Costs

Fulfillment costs as a percentage of revenue increased to 29.3% from 27.5% year over year due to higher transportation costs.

Decreased Gross Margins

Gross margins decreased to 31.5% in Q1 2025 from 37.9% in Q1 2024, due to higher revenue share costs and fulfillment expenses.

Negative Adjusted EBITDA

Adjusted EBITDA for Q1 2025 was negative $1.3 million, compared to $6.5 million in Q1 2024.

Increased Cash Flow Consumption

Free cash flow for Q1 2025 was negative $6.4 million, higher than the negative $1.4 million in Q1 2024.

Company Guidance

In the recent Q1 2025 earnings call for Rent the Runway, Inc., the company provided guidance for both the second fiscal quarter and the full fiscal year 2025. The call highlighted a significant investment in their inventory strategy, emphasizing an expected 420% year-over-year increase in new receipts for Q2 and a 134% increase for the entire year. Rent the Runway plans to introduce over 40 new brands and 2,700 new styles. The company saw a 1% year-over-year increase in ending active subscribers, reaching over 147,000, the highest in company history. Despite a 7.2% year-over-year decrease in total revenue to $69.6 million and a lower adjusted EBITDA of negative $1.3 million, the company is optimistic about improved customer retention and acquisition, driven by enhanced product offerings and marketing strategies. Q2 revenue is projected to be between $76 million and $80 million, with adjusted EBITDA margins expected to be negative 22%. The full year aims for double-digit growth in ending active subscribers and free cash flow consumption between negative $30 million and negative $40 million.

Rent the Runway Financial Statement Overview

Summary

Rent the Runway is grappling with profitability issues, reflected in a negative net profit margin and EBIT margin. The balance sheet is highly leveraged, with negative stockholders' equity and financial instability. Cash flow challenges persist despite some improvement in operating cash flow.

Income Statement

Neutral

The company shows a strong gross profit margin of 72.56% TTM, but net profit margin remains negative at -24.61% TTM, indicating profitability challenges. Revenue growth is relatively flat with a 1.48% increase over the last two years. The negative EBIT margin of -16.92% TTM reflects operational inefficiencies.

Balance Sheet

Negative

The balance sheet shows significant financial leverage with a negative stockholders' equity of -$207.1 million TTM and a high debt-to-equity ratio due to negative equity, signifying financial instability. The equity ratio is also negative, indicating potential solvency issues.

Cash Flow

Negative

The company has improved operating cash flow with a positive operating cash flow to net income ratio of 0.22 TTM. However, free cash flow remains negative, and the free cash flow to net income ratio is also negative, highlighting cash generation challenges.

TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
300.80M	306.20M	298.20M	296.40M	203.30M	157.50M
	Gross Profit
218.20M	223.40M	119.70M	204.20M	69.70M	-23.50M
	EBIT
-50.90M	-47.50M	-80.00M	-50.20M	-62.80M	-130.50M
	EBITDA
70.00M	72.70M	25.70M	-4.70M	-67.20M	-52.20M
	Net Income Common Stockholders
-74.00M	-69.90M	-113.20M	-138.70M	-211.80M	-171.10M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
70.40M	77.40M	84.00M	154.50M	247.60M	95.30M
	Total Assets
245.30M	240.00M	278.50M	336.20M	447.50M	320.70M
	Total Debt
386.00M	380.80M	356.60M	315.20M	312.80M	414.20M
	Net Debt
315.60M	303.40M	272.60M	160.70M	65.20M	318.90M
	Total Liabilities
452.40M	422.50M	400.80M	371.50M	376.40M	847.40M
	Stockholders Equity
-207.10M	-182.50M	-122.30M	-35.30M	71.10M	-526.70M
Cash Flow		Free Cash Flow
-43.60M	-40.70M	-98.20M	-118.70M	-83.40M	-121.50M
	Operating Cash Flow
16.60M	12.90M	-15.70M	-47.70M	-42.30M	-42.80M
	Investing Cash Flow
-28.80M	-20.10M	-54.60M	-44.30M	-22.50M	-58.40M
	Financing Cash Flow
-400.00K	-300.00K	700.00K	-4.00M	215.20M	168.50M

Rent the Runway Technical Analysis

Technical Analysis Sentiment

Negative

Last Price5.36

Price Trends

50DMA

5.27

Positive

100DMA

5.63

Negative

200DMA

7.72

Negative

Market Momentum

MACD

0.19

Positive

RSI

47.18

Neutral

STOCH

7.13

Positive

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 5.36 is below the 20-day moving average (MA) of 6.22, above the 50-day MA of 5.27, and below the 200-day MA of 7.72, indicating a neutral trend. The MACD of 0.19 indicates Positive momentum. The RSI at 47.18 is Neutral, neither overbought nor oversold. The STOCH value of 7.13 is Positive, 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 (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	62 Neutral	$6.88B	11.07	2.77%	4.28%	2.67%	-24.94%
SFIX	54 Neutral	$516.73M	―	-27.37%	―	-8.48%	55.77%
ZUMZ	50 Neutral	$212.54M	1,087.27	0.23%	―	3.01%	―
RENT	47 Neutral	$22.40M	―	47.49%	―	0.60%	36.38%
LVLU	47 Neutral	$19.20M	―	-179.00%	―	-11.33%	-183.48%
CURV	45 Neutral	$535.61M	54.03		―	-4.21%	-16.35%
TLYS	44 Neutral	$36.79M	―	-47.54%	―	-8.79%	-15.17%

* Consumer Cyclical Sector Average

Performance Comparison

RENT

Rent the Runway

5.57

-13.59

-70.93%

TLYS

Tilly's

1.22

-3.84

-75.89%

ZUMZ

Zumiez

12.35

-6.74

-35.31%

SFIX

Stitch Fix

4.12

0.25

6.46%

CURV

Torrid Holdings

5.06

-1.66

-24.70%

LVLU

Lulu's Fashion Lounge Holdings

0.45

-1.32

-74.58%

Rent the Runway Corporate Events

Executive/Board Changes

Rent the Runway Elects Daniel Rosensweig to Board

Positive

May 16, 2025

On May 12, 2025, Rent the Runway, Inc. announced the election of Daniel Rosensweig as a Class I director, increasing the Board’s size from seven to eight members. Rosensweig, who previously served on the Board from 2012 to 2023, was also appointed to the Finance Committee. His return is expected to strengthen the company’s governance and financial oversight, potentially impacting its strategic direction and stakeholder confidence.

The most recent analyst rating on (RENT) stock is a Buy with a $34.00 price target. To see the full list of analyst forecasts on Rent the Runway stock, see the RENT Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.