Earnings Release: Here's Why Analysts Cut Their Rent the Runway, Inc. (NASDAQ:RENT) Price Target To US$30.50

One of the biggest stories of last week was how Rent the Runway, Inc. (NASDAQ:RENT) shares plunged 22% in the week since its latest quarterly results, closing yesterday at US$9.15. Revenues came in at US$76m, in line with forecasts and the company reported a statutory loss of US$4.94 per share, roughly in line with expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Rent the Runway

After the latest results, the two analysts covering Rent the Runway are now predicting revenues of US$319.8m in 2026. If met, this would reflect a modest 4.6% improvement in revenue compared to the last 12 months. Losses are forecast to narrow 9.7% to US$19.28 per share. Before this latest report, the consensus had been expecting revenues of US$327.0m and US$17.90 per share in losses. So it's pretty clear consensus is more negative on Rent the Runway after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a pronounced increase to per-share loss expectations.

The consensus price target fell 7.6% to US$30.50, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Rent the Runway's revenue growth will slow down substantially, with revenues to the end of 2026 expected to display 3.7% growth on an annualised basis. This is compared to a historical growth rate of 14% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.7% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Rent the Runway.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Rent the Runway. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Rent the Runway's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2027, which can be seen for free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 7 warning signs with Rent the Runway (at least 3 which can't be ignored) , and understanding them should be part of your investment process.

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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.