Cowen on The RealReal: Expensive but worth It

Wall Street analysts are starting their coverage on luxury consignment platform The RealReal (REAL), and so far, most are bullish on the stock.

Cowen analyst Oliver Chen initiated The RealReal at Outperform with a price target of $32, which implies a 30% upside, on the belief that the company’s premium specialization yields a bigger and better customer experience.

“The RealReal is the largest online luxury resale platform that consigns and sells second-hand luxury items at 14% share. A key aspect of REAL’s success is its scale, creating and perpetuating competitive advantages that are difficult to replicate,” Chen wrote in a note to investors on Tuesday.

Louis Vuitton items for sale are displayed at The RealReal shop, a seven-year-old online reseller of luxury items on consignment in the Soho section of Manhattan, in New York City, New York, U.S., May 18, 2018. Picture taken May 18, 2018. REUTERS/Mike Segar

He laid out four main competitive advantages that distinguish The RealReal: 1) advanced supply gathering capabilities and reach, 2) sophisticated logistics and fulfillment infrastructure & authentication, 3) advanced data analytics, 4) high sales velocity and sell-through rates.

Cowen estimates that the current U.S. luxury resale market is worth about $7 billion, and notes that about half of that is attributable to online resale players. The firm expects the luxury resale market to grow by more than 50%, to $11 billion, by 2022.

Despite his optimism, one of the main risks to The RealReal’s story continues to be whether it will become profitable. When it filed its S1 with SEC in May, The RealReal disclosed that it had a history of losses, and it may not achieve or maintain profitability in the future.

Other analysts initiated coverage as follows:

Bank of America Merrill Lynch: Neutral, $28 price target

Credit Suisse: Outperform, $30 price target

KeyBanc: Overweight, $31 price target

Raymond James: Market perform

Stifel: Buy, $30 price target

UBS: Buy, $30 price target

Pamela Granda is a producer on Yahoo Finance’s closing bell show, The Final Round. Follow her on Twitter.

Read more:

Facebook beats Q2 expectations, says FTC has opened an antitrust investigation

Tesla posts wider-than-expected Q2 loss

DoorDash says it will change tipping policy after widespread outrage

Dunkin' enters the plant-based meat craze by joining forces with Beyond Meat

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.