- Rent the Runway stock surges more than 150% on updated 2024 outlook.
- Officials predict that the company will turn free cash flow positive this year.
- PPI report defies Wednesday’s CPI with falling inflation at producer level.
- RENT stock trades to seven-month high but fails to fill gap.
Rent the Runway (RENT) stock has soared above 150% on Thursday as the down-on-its-luck ecommerce play renewed market interest with a game-changing outlook for the present year.
RENT stock has traded above $18.50, while the broader market largely continues sagging after Wednesday’s hot Consumer Price Index (CPI) reading for March. The higher than expected inflation report led the market to downplay any Federal Reserve (Fed) interest rate cut in the near term.
However, the NASDAQ is bucking the pullback to rise 0.7% at the time of writing. Thursday’s Producer Price Index (PPI) report showed falling inflation, which has given some tech stocks the greenlight.
Rent the Runway stock news
Rent the Runway, a company that rents designer clothing to an army of subscribers, posted another exorbitant loss for the fourth fiscal quarter of 2023, reported late Wednesday. However, the market chose to focus instead on the pleasant upside from the 2024 fiscal outlook.
“Over the past several years, we have reduced fixed costs significantly and made considerable progress towards building a more capital-light model,” said CFO Sid Thacker. “We expect these actions to result in free cash flow breakeven for fiscal year 2024.”
In fiscal 2024, CEO Jennifer Hyman expects revenue to grow from $298.2 million in the previous year to $312.5 million.
In the reporting quarter, which ended on January 31, Rent the Runway saw little YoY user growth. Active subscribers fell 1% to just below 126K, while total subscribers rose 1% to above 173K.
In fiscal Q4, Rent the Runway reported a loss of $-7.02 per share in GAAP earnings, which was better than the previous year’s $-8.07 loss. However, this still missed Wall Street estimates by $1.13. Revenue of $75.8 million rose 0.5% YoY but beat analysts expectations by $1.4 million.
CEO Hyman praised the company for installing a number of cost-saving strategies that she said would continue to bear fruit in the coming quarters.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Rent the Runway stock forecast
Rent the Runway just performed a 1-for-20 reverse stock split at the beginning of the month. That’s how much the market was betting on its prospects.
Now it would seem that RENT stock has hope. The stock is valued at just $76 million in total market cap, so just trading at one time annual revenue could mean a 300% return.
RENT stock rotated above its fateful drop on September 8 of last year. The gap created from the previous session has a low of $25.20, and that is where the market’s bulls will try to push it. Traders love closing gaps.
It is quite hard to know where support lies after a spike like this, but the best guess is the area surrounding $17. That’s where RENT stock found resistance in mid-December 2023.
RENT daily stock chart
