Revolve Earnings: Macro Challenges but Long-Term Prospects Still On-Trend; Shares Very Attractive

No-moat Revolve’s challenging second-quarter results and tempered guidance sent the shares down 11% in afterhours trading, but we think the market is overly fixated on the near-term macro challenges, leaving shares deeply undervalued. Underpinning the reaction, management trimmed its fiscal 2023 outlook to a 52%-52.5% gross margin (down from 52%-53%) while projecting slightly higher operating costs for the balance of the year. We plan to adjust our near-term estimates into the guided range, and consequently expect to trim our $31 fair value estimate by a low-single-digit percentage. We maintain our midteens top line growth over our explicit forecast (after fiscal 2023).