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International Expansion And Digital Focus Will Fuel Success

Published
13 Sep 24
Updated
07 Aug 25
AnalystConsensusTarget's Fair Value
US$24.57
9.1% undervalued intrinsic discount
10 Sep
US$22.34
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1Y
-9.4%
7D
-6.3%

Author's Valuation

US$24.6

9.1% undervalued intrinsic discount

AnalystConsensusTarget Fair Value

Last Update07 Aug 25

Despite consensus revenue growth forecasts remaining stable, a substantial decline in Revolve Group's future P/E multiple suggests lower expectations for profitability, resulting in the analyst price target staying unchanged at $24.57.


What's in the News


  • From April 1 to June 30, 2025, Revolve Group repurchased 92,583 shares for $1.74 million, completing the buyback program announced on August 2, 2023, with a total of 3,058,635 shares repurchased for $44.11 million (4.22% of shares outstanding).

Valuation Changes


Summary of Valuation Changes for Revolve Group

  • The Consensus Analyst Price Target remained effectively unchanged, at $24.57.
  • The Future P/E for Revolve Group has significantly fallen from 27.26x to 15.31x.
  • The Consensus Revenue Growth forecasts for Revolve Group remained effectively unchanged, at 7.0% per annum.

Key Takeaways

  • International expansion, digital marketing, and AI-driven personalization are accelerating customer acquisition, engagement, and long-term revenue growth.
  • Investments in exclusive brands and supply chain optimization are set to improve margins while mitigating external risks.
  • Margin pressures, inventory risks, and vulnerability to shifting consumer behaviors threaten profitability and growth amid tariff uncertainty and international expansion challenges.

Catalysts

About Revolve Group
    Operates as an online fashion retailer for millennial and generation z consumers in the United States and internationally.
What are the underlying business or industry changes driving this perspective?
  • Expanding international presence, especially with substantial growth in China and other underpenetrated markets, positions Revolve to capture outsized revenue growth as Millennial and Gen Z consumers in these regions increasingly shift spending online.
  • Ongoing investments in owned and exclusive brands are expected to drive higher gross margins and net margins, supported by better inventory management, tighter markdown algorithms, and diversification of supply chains to mitigate tariff impacts.
  • Data-driven personalization, enhanced AI-powered search and merchandising, and increased efficiency in marketing campaigns are boosting average revenue per active customer and expected to improve customer retention, driving future topline and margin expansion.
  • Category diversification beyond event wear-into shorts, beauty, men's, and home-broadens Revolve's addressable market and deepens wallet share, fueling new customer acquisition and higher revenue per customer over time.
  • Success with influencer-led brand events and digital-first marketing continues to amplify social media impact and drive efficient customer acquisition, directly benefiting future revenue growth and operating leverage as digital consumer influence accelerates.

Revolve Group Earnings and Revenue Growth

Revolve Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Revolve Group's revenue will grow by 6.6% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 3.8% today to 4.6% in 3 years time.
  • Analysts expect earnings to reach $65.4 million (and earnings per share of $0.97) by about September 2028, up from $45.3 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $79.1 million.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.2x on those 2028 earnings, down from 37.1x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
  • Analysts expect the number of shares outstanding to grow by 0.76% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 8.15%, as per the Simply Wall St company report.

Revolve Group Future Earnings Per Share Growth

Revolve Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Rising tariff volatility and uncertainty, particularly regarding China, create margin pressure and risk potential future gross margin contraction if mitigation efforts become less effective or costlier, impacting earnings and net margins over time.
  • Ongoing decline in average order value (AOV) due to both product mix shift toward lower-priced categories and potentially lower full-price sales may limit revenue growth and compress gross profit, especially if price-sensitive consumers resist future cost pass-throughs.
  • The heavy investment in owned brands, while supporting gross margin, increases inventory risk and exposes the company to challenges if trend misjudgments or launch failures occur, potentially leading to heavier markdowns and inventory write-downs, which would pressure gross margins and earnings.
  • International expansion, especially in markets like China, makes Revolve more susceptible to geopolitical risks (such as anti-American sentiment and regulatory changes), which could slow international sales growth or increase operational costs, threatening top-line growth and profitability.
  • Continued reliance on influencer-driven marketing and social media trends leaves Revolve vulnerable if consumer preferences shift away from influencer-driven discovery, potentially increasing customer acquisition costs and reducing revenue and net earnings if engagement declines.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of $24.571 for Revolve Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $19.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $65.4 million, and it would be trading on a PE ratio of 34.2x, assuming you use a discount rate of 8.1%.
  • Given the current share price of $23.56, the analyst price target of $24.57 is 4.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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