Piper Sandler has given an optimistic nod to Revolve Group (NYSE:RVLV). The retail stock has been upgraded to an Overweight rating from Neutral. Last year, the firm had downgraded RVLV, but revisiting their stance now, the firm believes that the prior cautious phase on premium discretionary spending has largely run its course. One of the factors influencing this decision is Revolve’s strong balance sheet, which is anticipated to provide significant capital and strategic flexibility.

RVLV Progress and Potential

Edward Yruma, an analyst at Piper Sandler, shared insights on Revolve Group’s progress with its inventory position. He also pointed out the likely stabilization and nominal improvements in return rates that are expected to drive gross margin expansion. Moreover, he expressed the belief that the rapidly consolidating luxury online space will present significant long-term opportunities for RVLV’s FWRD segment.

Price Target and Stock Performance

Piper Sandler has set a price target of $21 on RVLV, factoring in the potential for gross margin improvement. This price target aligns with a ~17X 2025 EV/EBITDA target multiple, compared to the 22.0X three-year average. Following this strategic assessment, RVLV shares gained 1.11% in morning trading on Wednesday, reaching $14.56. This movement occurred within the 52-week trading range of $12.25 to $32.59. It’s worth noting that short interest on RVLV stands at 25.2% of the total float, and the Seeking Alpha Quant Rating on RVLV still indicates a Strong Sell.