Revolve Stock May be Well-Positioned for Short-Term Growth

What you need to know about RVLV stock ahead of tomorrow's earnings report

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Revolve Group, Inc. (NYSE:RVLV) is an online fashion retailer for women. The company is known for its impressive implementation of social media platforms and its collaborations with influencers. Revolve Group is slated to report earnings tomorrow, November 11 after the close. RVLV has tripled off its March lows near $7, but is 12% from the 52-week high it scored on Aug. 14.

As far as earnings announcements go, Revolve has beat expectations on all four of its most recent earnings reports. When reporting on the third quarter of 2019, Revolve beat expectations by $0.02. The company reported an earnings per share (EPS) of $0.13. In the following financial report released showing results from the fourth quarter of 2019, Revolve's earnings dropped to $0.12 per share, but beat expectations by $0.01. Revolve further dropped in its reported EPS down to $0.06 for the first quarter of 2020, but again still managed to beat expectations by $0.02. Most recently, Revolve's quarterly earnings report revealed that the company beat its target by approximately 900%. The company reported an EPS of $0.20 instead of the anticipated EPS of $0.02. With the next earnings report slated for release tomorrow, Revolve is expected to drop its EPS to $0.14.

One thing that stands out when looking at RVLV's technical backdrop is the amount of short interest tied up into the stock. Short sellers upped the ante by 32% in the two most recent reporting periods, and the 8.67 million shares sold short accounts for a whopping 64% of the stock's total available float. At RVLV's average pace of trading, it would take almost six days for shorts to buy back their bearish bets; ample amount of buying power that can hit the market.

Revolve has performed fairly well throughout the pandemic this year. The company only saw a slight reduction in revenue when compared to what it produced last year, but has still managed to increase its bottom-line profits over the past 12 months. As an already-thriving online retail company, Revolve was spared from the pain that brick and mortar retail companies saw this year, and may continue to see well into next year or beyond. The company solved a lot of its issues by reducing its inventory.  Revolve was also able to improve on its already outstanding balance sheet during the coronavirus pandemic.

The most notable impact of the pandemic on Revolve was that it caused a slow-down in the company's growth rate in a year where the company was previously positioned to do exceptionally well. Nonetheless, the $150 million in cash Revolve holds should be more than enough to help the company resume its growth pattern, which was already notably jumpstarted with its above and beyond report on second quarter of 2020 earnings.

Because of its continued growth throughout this year, RVLV  is not particularly well-priced for stock investors to jump on now. If the company releases a strong earnings report on Wednesday, there is a strong likelihood that the stock price will increase further.

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