What Happened?

Shares of secondhand luxury marketplace The RealReal (NASDAQ: REAL) jumped 18.4% in the morning session after the company reported a "beat and raise" quarter. Third-quarter earnings blew past analysts' Gross Merchandise Value (GMV), revenue and EBITDA expectations. Volumes increased year on year, exceeding expectations and making up for the shortfall in buyer count. Its full-year EBITDA guidance also exceeded Wall Street's estimates. Overall, this was a strong quarter.

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What The Market Is Telling Us

The RealReal’s shares are extremely volatile and have had 51 moves greater than 5% over the last year. But moves this big are rare even for The RealReal and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 8 months ago when the stock gained 37.2% on the news that the company reported fourth-quarter results that beat analysts' revenue expectations. The company delivered positive EBITDA for the first time as it focused on its consignment business, a strategic shift it enacted in 2023. Its average order value was 10% larger than in the same quarter last year thanks to higher prices for its products. 

On the other hand, volumes declined by 17%. Furthermore, its number of active buyers fell. Looking ahead, its revenue and EBITDA guidance for the full year 2024 topped Wall Street's projections. 

Overall, this was a decent quarter, with the promising guidance likely providing more reason for investors to stay positive. 

Additionally, there is a decent short interest of over 10% on the stock, which means that some investors were betting against the company. Short covering--those betting against it getting out of those positions following good results--may be magnifying the stock price move today.

The RealReal is up 81.7% since the beginning of the year, but at $3.58 per share, it is still trading 21.4% below its 52-week high of $4.55 from May 2024. Investors who bought $1,000 worth of The RealReal’s shares 5 years ago would now be looking at an investment worth $184.56.

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