RealReal (REAL): Evaluating Valuation as Investor Focus Shifts to Monetization Risks and User Growth Strategy

Fresh commentary about The RealReal (REAL) has put a spotlight on the company’s strategy of prioritizing user growth instead of monetization. Investors are weighing the risks of falling average revenue per user and potential cash pressures, particularly as dilution concerns remain in focus.

See our latest analysis for RealReal.

This renewed scrutiny over The RealReal’s monetization approach comes after a blistering run for the stock. Its 90-day share price return of 132% and one-year total shareholder return of 320% have caught investors’ attention. While momentum has clearly been building in the short term, the longer-term picture reminds us the road has been volatile, with a five-year total return still negative. Recent gains suggest shifting sentiment as investors look ahead to what comes after the current growth push.

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With impressive gains fresh in mind, the big question is whether The RealReal is still trading at a discount or if the market has already factored in all of its future growth, leaving little room for upside.

Most Popular Narrative: 12% Overvalued

With RealReal’s fair value according to the most popular narrative set at $10.83, but the last close price standing higher at $12.18, the gap between market enthusiasm and underlying earnings assumptions becomes clear.

Continuous investment in AI-driven automation (Athena and other initiatives) is delivering ongoing reductions in processing costs per unit and streamlining authentication. This enables scalable operational efficiencies that lower unit costs and support sustained margin expansion and improved EBITDA.

Read the complete narrative.

Curious what’s driving this premium price? This consensus narrative builds its valuation on breakthrough operational tech and bold profit margin projections. However, it all changes if one key revenue assumption shifts. Want to uncover what else is fueling analyst conviction? See how much hinges on high-stakes growth bets and game-changing efficiencies.

Result: Fair Value of $10.83 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, if luxury demand softens or there are delays in scaling AI-driven efficiencies, this could cast doubt on the sustainability of RealReal's bullish narrative.

Find out about the key risks to this RealReal narrative.

Another View: Comparing Key Ratios

Stepping back from complex fair value models, the company’s price-to-sales ratio stands at 2.2x, which is notably higher than both its peer average of 1.6x and the US Specialty Retail industry norm of just 0.4x. Even compared to the fair ratio of 1.6x, RealReal looks expensive by this measure. This suggests a premium price that demands strong future results. Could current optimism prove overextended?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out RealReal for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 832 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own RealReal Narrative

If you see things differently or want to dig deeper on your own terms, it’s easy to build a personalized view with just a few clicks. Do it your way

A great starting point for your RealReal research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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