Revolve Group (NYSE:RVLV) shares dropped in early Thursday trading after the company's shares were downgraded by analysts at Baird and Jefferies.
The stock initially fell over 4% before regaining some of its earlier losses. It currently trades at around $15.46, down approximately 2.6%.
Analysts at Baird downgraded RVLV to Neutral from Outperform, maintaining the $17 per share price target. The analysts noted the company's shares have rallied 20% in the past three months, pushing the valuation to 34x P/E, near the historical average.
"Though progress has been made on internal initiatives to clean up inventory and implement cost savings measures, this has been overshadowed by ongoing demand pressures," they wrote. "Top-line inflection is the predominant issue for the stock (needed to drive confidence in share gain story, get leverage in operating model), and timing remains uncertain amid ongoing pressures on aspirational consumer spending and a generally tough backdrop for luxury e-commerce (FWRD still working through excess inventory)."
Baird continues to believe RVLV's model can gain share in the long term but feels the risk/reward appears more balanced at a higher valuation amid "a still-cloudy demand outlook."
Meanwhile, analysts at Jefferies lowered RLV to Hold from Buy, also keeping a $17 price target on the shares.
They believe consumer pressures will likely subdue the company's near-term performance.
"Internet apparel retailers have collectively struggled in recent quarters as consumer demand trends have softened," they commented. "We believe the macro environment is likely to continue to pressure consumer discretionary spending for the foreseeable future, and RVLV is not immune."
Jefferies is also positive on the long-term outlook for the stock, stating it will be a "long-term share gainer in the highly-fragmented apparel space," but they are moving to the sidelines based on near to mid-term uncertainty.