Rent the Runway shares get caught up in AI frenzy, surge over 200% (updated)

Rentunder Holding AB

11/04/2024 18:19

(Adds analyst comment in paragraph 9 and updates shares)
    By Ananya Mariam Rajesh
       April 11 (Reuters) - Traders piled into shares of Rent
the Runway  RENT.O  on Thursday, sending the shares up by more
than 220% after the apparel rental firm said it was betting on
artificial intelligence tools to power its growth in the current
year. 
    More than 34 million shares had changed hands, far
surpassing the usual calm trading in a stock that coming into
Thursday only had a market value of $26.27 million. 
    But numerous companies have kicked off rallies in their
stocks over the last year by talking up their plans to use
artificial intelligence to boost their businesses - and Rent the
Runway is now the latest to join that frenzy.
    The company has forecast revenue to grow between 1% and 6%
in the current fiscal year, compared with a 0.6% rise in 2023,
and expects breakeven free cash flow.
    "Rent the Runway has just become the poster girl for
investors that believe AI can help small business and not just
large behemoths," said Michael Ashley Schulman, chief investment
officer at Running Point Capital Advisors.
    Shares of the company were last up 138.7% at $17.82, giving
it a market capitalization of about $63.3 million.
    Last week, the company put into effect a one-for-20 reverse
stock split to regain compliance with the minimum bid price
requirement for continued listing on the Nasdaq. 
    Following the move, it now has a free float of about 2.6
million shares, according to LSEG data. 
    Strong buying pressure on a low float stock is causing sharp
pressure, said Ihor Dusaniwsky, managing director of predictive
analytics at S3 Partners.
    Rent the Runway, which focuses on selling designer brands,
had seen a hit to demand due to quality issues and outdated
product assortments. The company went public in 2021 and the
stock was priced at $21. 
    CEO Jennifer Hyman said customer loyalty rate in the fourth
quarter was up 10% year-over-year and the company has planned
new designer launches for 2024.

 (Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by
Ravi Prakash Kumar and Anil D'Silva)
 ((AnanyaMariam.Rajesh@thomsonreuters.com ; Twitter: https://twitter.com/AnanyaMariam;))