RVLV’s valuation remains an issue in the short-term
Fashion retailer Revolve Group, Inc. (NYSE:RVLV) has been tumbling down the charts since a Nov. 19, record high of $89.55, guided lower by the 20-day moving average. The $51 level seems to have emerged as a floor for the security, though, while the $57 level has been capping the shares since mid-December. Over the last three months, RVLV has shed roughly 22%.
The brokerage bunch is firmly bullish towards Revolve stock, with 11 of the 13 analysts in coverage sporting a "buy" or better rating. Meanwhile, short sellers are piling on, with the 4.87 million shares sold short now making up 12.4% of the equity's available float.
The options pits are also optimistic. The stock's 10-day call/put volume ratio of 22.40 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than all readings from the past 12 months. This means calls are getting picked up at a quicker-than-usual clip of late.
These options traders are in luck, as the equity sports affordably priced premiums at the moment. This is per RVLV's Schaeffer's Volatility Index (SVI) of 59%, which stands in the 16th percentile of its 12-month range, indicating volatility expectations are unusually low right now.
From a fundamental point of view, Revolve's valuation has heavily outpaced its financial output. The stock currently trades at a high price-earnings ratio of 42.67, and an inflated price-sales ratio of 5.90. However, RVLV’s revenues and net income are still up 59% and 191%, respectively, since 2018, despite the brand experiencing a 3.4% drop in revenues for 2020.
Overall, Revolve stock remains a promising long-term play due to its high growth rate. However, the risk of RVLV continuing its current bearish form in the short-term is high, due to its pricey valuation.