Rent the Runway Stock Forecast: RENT bounds 162% higher as company predicts positive FCF


  • Rent the Runway stock surged more than 160% 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 closed up 161.9% higher to $19.38 on Thursday as the down-on-its-luck ecommerce play renewed market interest with the announcement that it should reach positive free cash flow in 2024. RENT stock reached an intraday high of $24.12 one hour into the session, traded down below $17 before reigniting the rally toward the end of the session. Afterhours RENT rose back above $20 per share.

The broader market sagged in the morning session but made robust gains in the afternoon following Thursday's Producer Price Index (PPI) report, which showed falling headline inflation.

The NASDAQ has responded the best to the PPI news and risen 1.7%, recouping some of Wednesday's sell-off. The S&P 500 gained 0.7%, while the Dow Jones closed just barely in the red.

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 fiscal 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.

Nasdaq FAQs

The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

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

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