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Wall Street is wrong about Revolve (RVLV)

May 4, 2022

Yesterday Revolve Group issued its 22Q1 report and shares traded more than -20% lower the following day despite beating analyst estimates across the board.

What happened?

The company reported record quarterly growth in active customers (+38%) helping to drive net sales +58% higher YoY.

"Consistent with prior commentary, we continue to expect the second quarter ending June 30, 2022 to be our largest sales quarter of the year as our core customer gears up for a busy travel and event calendar in the warm summer months ahead,” the company stated.

LikeFolio consumer demand data confirms that Revolve’s current quarter pace looks incredible:

This tells us that Wall Street may be underestimating Revolve’s potential for future growth.

Additionally, elevated short interest (~12% of the float) will likely add fuel to the fire of the stock’s eventual rebound.

This combination presents an excellent set-up for long-term investors armed with real-time consumer insights.

Here’s why we’re doubling down on RVLV

In March, data from the U.S. Department of Commerce revealed an interesting finding.

Despite inflation and rising gas prices, retail spend is still rising on a YoY basis…albeit at a slower rate.

Digging deeper, data suggests one retail sector is outperforming regarding YoY growth. Clothing and accessories sales increased by +7% YoY.

And Revolve is benefitting tremendously from this tailwind, at least when it comes to rising consumer demand…

Revolve Group (RVLV) Demand Rocketing as Social Events Resume

Revolve Group is a next-generation fashion eCommerce retailer for Millennial and Generation Z consumers.

Consumer mentions of Revolve have exploded higher over the last couple of weeks, at +66% QoQ and +105% YoY.

What’s going on?

Celebrity partnerships and special events are driving purchases. Loyal LikeFolio readers will recall that this was the same strategy that propelled Crocs (CROX) from under $10 to over $180 in 2020/2021.

We’re beginning to see signals that Revolve could be on a similar path of consumer adoption.

Mention volume spiked in April when Kim Kardashian partnered with Revolve Group to release an exclusive Revolve Spring Style Edit.

Furthermore, social events are back in action:

Even brand-specific social events.

Revolve Group hosts an annual event just outside of Coachella Music Festival exclusive to social media influencers. While the event itself had plenty of room for improvement this year, the brand’s reach across the influencer space was not lost on consumers.

But the critical question to ask when reviewing the effectiveness of partnerships and special events:

Did these events drive a fleeting spike in mentions, or did these actions prompt a longer-term uptick in consumer purchasing activity?

According to LikeFolio data, these events are moving the needle in an organic way.

Mentions of consumers buying items from Revolve have steadily risen +74% QoQ and +58% YoY.

The key: while the company’s mentions spiked, its purchase intent mentions reflect stable and consistent growth.

Meanwhile, sentiment is rising alongside this uptick in demand: +5% YoY, currently recording nearly 91% positive.

That phenomenon (rising happiness alongside rising mentions) is an extremely rare occurrence in our universe.

When we see it, we pay attention… especially when Wall Street is selling the stock down like this.

RVLV shares have shed more than 40% in value over the past 6 months as growth stocks fall out of Wall Street's favor.

But data suggests the company may be oversold.

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