ThredUp Inc. TDUP continues to attract investor attention following its robust preliminary fourth-quarter 2024 results, reported last Tuesday. The company’s exceptional performance, driven by TDUP’s U.S.-focused strategy and AI-powered operational improvements, has reinforced its strong growth trajectory in the resale apparel industry.

With the latest results exceeding guidance, investors are now considering a critical question, is ThredUp stock poised for growth or is it time to lock in gains?

Shares of this one of the largest online resale platforms for apparel, shoes and accessories have gained an impressive 55.9% in the past month against the industry’s decline of 3.6%. The S&P 500 index has risen 0.4% at the same time.

TDUP Stock Past One-Month Performance

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TDUP’s 4Q Preliminary Performance: Key Takeaways

ThredUp’s fourth-quarter preliminary results exceeded expectations, underscoring the success of its streamlined operations and strategic focus on core business areas. (Read: ThredUp Posts Strong Q4 Preliminary Results: What's More to Know?)

Preliminary results indicate revenues between $66.7 million and $67.2 million, indicating a 9% year-over-year increase and surpassing earlier guidance of $58-$60 million. It shows a gross margin in the band of 80.2-80.4%, exceeding the previously forecasted range of 78.5-79.5%. The results also highlight an adjusted EBITDA margin between 6.4% and 6.9%, well above the flat to 2% range originally estimated.

The company attributed its strong preliminary results to TDUP’s focused efforts on the U.S. market, where operational efficiency and improved customer engagement are driving growth. With the divestiture of the company’s operations in Europe last year, ThredUp is now concentrating solely on its U.S. business. As a result, the company will no longer report combined results or offer a combined outlook, its operations in Europe have been classified as discontinued operations.

Estimate Revisions Favoring TDUP Post Q4 Preliminary Results

Indicating the positive sentiment around ThredUp, the Zacks Consensus Estimate for the current quarter and the current fiscal year has improved 5 cents to a loss of 8 cents and 56 cents per share, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Reasons Behind Analysts’ Optimistic Approach to TDUP Stock

The company has achieved its strongest new buyer growth in two years, driven by enhanced ad targeting and full-funnel conversions. Improved product experiences, and refined email and push notification strategies have strengthened retention rates, boosting repeat purchases. These efforts have resulted in robust Lifetime Value-to-Customer Acquisition Cost ratios and faster payback periods.

The company has also made significant improvements in its sourcing strategy and pricing algorithms, offering customers attractive deals and driving strong sales. These operational efficiencies have bolstered contribution margins and profitability, enabling ThredUp to reinvest in growth while maintaining financial stability.

ThredUp is setting new standards in the resale market through the integration of advanced AI tools, enhancing the overall customer experience. Features like Image Search, AI-driven style recommendations and interactive tools, such as Style Chat, enable a personalized shopping journey. Moreover, innovations like 360-degree product views and automated flaw detection are expected to improve conversion rates and customer satisfaction, further differentiating ThredUp in the resale space.

ThredUp’s successful transition to a consignment-based model, combined with its robust operating infrastructure, has significantly improved operational efficiency and cash flow. This solid foundation supports scalability and positions the company well to capitalize on growth opportunities in the resale market.

How to Play TDUP Stock?

ThredUp is well-positioned for growth with its strong customer acquisition strategies, refined sourcing and pricing algorithms, and innovative use of AI. However, ThredUp is not fully immune to challenges in the broader market and macroeconomic environment. Despite this, its focus on operational efficiency and expanding TDUP’s foothold in the resale market offers promising long-term prospects. With these positive fundamentals, TDUP is an attractive investment for those looking to benefit from the growing resale trend. TDUP currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Abercrombie & Fitch Co. ANF operates as an omnichannel retailer that offers an assortment of apparel, personal care products and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands. The company currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales and earnings indicates growth of 15.1% and 69.4%, respectively, from the previous year’s reported number. ANF delivered a trailing four-quarter average earnings surprise of 14.8%.

The Gap, Inc. GAP operates as an apparel retail company that offers apparel, accessories and personal care products for men, women and children under the Old Navy, Gap, Banana Republic and Athleta brands. The company currently sports a Zacks Rank #1. GAP delivered a trailing four-quarter average earnings surprise of 101.2%.

The Zacks Consensus Estimate for Gap’s current fiscal-year sales and earnings indicates growth of 0.8% and 41.3%, respectively, from the previous year’s reported figures.

Deckers Outdoor Corporation DECK designs, markets and distributes footwear, apparel and accessories for casual lifestyle use and high-performance activities in the United States and internationally. It currently sports a Zacks Rank #1. DECK delivered a trailing four-quarter average earnings surprise of 41.1%.

The Zacks Consensus Estimate for Deckers’ current fiscal-year sales and earnings indicates growth of 14.1% and 14.4%, respectively, from the previous year’s reported figures.

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