What Happened?
Shares of online fashion retailer Revolve Group (NASDAQ: RVLV) jumped 8.1% in the morning session after the major indices soared, with the Nasdaq up 1.4%, while the S&P rose 0.7% after the Bureau of Labor Statistics reported the Consumer Price Index (CPI) for November 2024 which was in-line with expectations. The CPI rose 0.3% from the previous month, while headline inflation rose 2.7% year on year, nearing the Federal Reserve's 2% target but not quite there yet. The market reaction suggests investors interpreted the report as a signal for the Fed to lower rates, reinforcing expectations of a 0.25% cut at the December 2024 meeting.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. The result of lower interest rates, all else equal, is higher stock valuations. This is especially true for higher-growth stocks, such as those in the technology sector, where the current value depends more on cash flows many years out in the future.
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What The Market Is Telling Us
Revolve’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 28.3% on the news that the company reported second quarter earnings results. Revolve narrowly beat analysts' revenue expectations. The number of buyers on its platform also outperformed Wall Street's estimates. On the other hand, its revenue growth regrettably slowed. Overall, this was a solid quarter for Revolve.
Revolve is up 130% since the beginning of the year, and at $38.34 per share, it is trading close to its 52-week high of $38.80 from November 2024. Investors who bought $1,000 worth of Revolve’s shares 5 years ago would now be looking at an investment worth $2,281.
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