Piper Sandler analysts downgraded Rent the Runway (RENT) to Neutral from Overweight on Wednesday, following the upgrade of Burlington Stores (NYSE:BURL) and Revolve Group (NYSE:RVLV) to Overweight in notes on Tuesday.
In a note covering the global lifestyle brands sector, Piper Sandler said the most important swing factor in 2024 will be whether we see a shift back to discretionary goods.
They added that they are inclined to be constructive on the sector at this point - assuming that consumer spending remains stable.
The firm lowered its price target for RENT to $0.75 per share from $2, stating the company's equity value represents "a mere 20% of total enterprise value," and they think a meaningful reduction in leverage will be necessary over the medium-term.
"Recent cost initiatives should help drive better financial performance near term, but both marketing and inventory investments may be needed to drive the necessary long-term growth," said Piper Sandler.
In the note covering RVLV, the firm said its previous cautious thesis has now played out. More controlled inventory and likely stabilization/nominal improvements in return rates will help drive gross margin expansion, analysts wrote.
"We also believe that a rapidly consolidating/collapsing luxury online space will offer significant L-T opportunity for RVLV's FWRD segment," said the firm, lifting its price target for the stock to $21 from $16 per share.
Burlington's price target was raised to $240 from $155. Piper Sandler is increasingly confident in the 300+ bps margin expansion opportunity and believes market share gains are likely to continue.
"We believe department stores have remained highly conservative for 1H24 inventory buys, which creates a favorable environment for off-price to take continued share," analysts wrote. "Our store checks point to continued momentum with the Burlington 2.0 initiative and think that the lower-middle income consumer remains stable to nominally improving.