ThredUp will attraction to middle-income shoppers who can be spending cash on clothes post-COVID

ThredUp Inc. features analysts who say the company is poised to grow in the red-hot resale market.

TDUP, + 8.78%
is a Online second hand dealer that began to act 26th of March.

KeyBanc Capital Markets has initiated ThredUp shares overweighted with a price target of USD 22.

“[W]We believe ThredUp is well positioned as middle class consumers turn to apparel spending, ”wrote analysts, led by Edward Yruma.

Analysts and investors have turned their attention to spending behavior as the vaccine rollout continues. Clothing sales It is expected that this will be one of the areas that will get a boost after the end of the pandemic.

With prices roughly 40% below retail, the ThredUp marketplace offers middle-income buyers the opportunity to buy more at better prices.

ThredUp will also benefit from repeat business, according to the data compiled by KeyBanc.

Read: ThredUp CEO on IPO Day: Don’t Control Resale and Amazon’s Speed ​​is a Fading Trend for Young Buyers

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“Our Key First Look (KFL) data suggests strong cohort retention and we believe that improving macro / apparel conditions will accelerate sales again.”

ThredUp is also supported by consumer trends that accelerated during COVID-19, including the move to e-commerce and consumers’ desire to shop sustainably.

On Tuesday, Lululemon Athletica Inc.
LULU, -2.24%
was the newest brand to offer Second-hand goods. Nike Inc. has opened a refurbished sneaker store last week. And Walmart Inc.
WMT, + 0.62%
and Gap Inc.
GPS, -2.16%
are just a few of the companies that have partnered with ThredUp over the past year as part of their own resale initiatives.

Second-hand competitor Poshmark Inc.
POSH, -2.12%
and The RealReal Inc.
REAL, -3.76%
went public in recent years.

Likewise: Poshmark will benefit from the move to used consumers cleaning their cabinets

“Cowen believes that department stores and mall retailers are likely to be stock donors in the next few years due to a combination of store closures and a greater shift in consumer preference to online and value-based concepts,” Cowen analysts wrote in a report dated Jan. March.

Cowen expects the online resale market to grow 25% at a compound annual growth rate (CAGR) and reach $ 70 billion by 2028.

Resale adoption is most robust among women between the ages of 18 and 34, according to Cowen Consumer Tracker.

According to Cowen, ThredUp, along with Poshmark and The RealReal, are among the leaders in the resale space, with smaller companies like Mercari and Rebag making the category more competitive.

“We see significant room for growth as resale becomes popular in all age groups and sustainability becomes a major issue. In addition, the flywheel effect of buyers becoming sellers and vice versa should support resale growth and promote customer loyalty, ”write analysts, led by Oliver Chen.

Wells Fargo initiated an overweight ThredUp stock with a price target of $ 22. Analysts, led by Ike Boruchow, see resale as a “potentially disruptive” sector of the retail market, and ThredUp’s business model can scale and “support high margins over the long term”.

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Wells Fargo and KeyBanc analysts also highlight the efficiency of ThredUp’s operations.

“ThredUp’s network with highly automated distribution centers enables a solid order economy with an AOV of 69 USD [average order value]”Wrote KeyBanc.

“Low processing / distribution costs are very important given the low prices, and we believe this offers a significant structural advantage.”

ThredUp shares rose 11.1% on Tuesday, despite having slumped 27.6% so far this month. The S&P 500 Index
SPX, -0.66%
has risen by almost 4% so far in April.