Research from Water Tower Research, Water Tower Research

Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Equity Bottom-Up

<ul><li>We are initiating coverage of REAL. Post-COVID, almost all of the small-cap online apparel retailers have tried to restructure their businesses to focus on profitability.</li><li>REAL has been a standout case. After issuing a five-year outlook in March 2022 that emphasized growth (virtually at all costs), REAL reversed its strategy in a bid to become EBITDA and free cash flow (FCF) positive as quickly as possible.</li><li>In the process, it materially de- emphasized (1) its direct sales business, which was inherently lower-margin and exposed REAL to both pricing pressure and inventory risk, and (2) the lower-priced consignment items, which were loss-making from the get-go. </li></ul>

We are initiating coverage of REAL. Post-COVID, almost all of the small-cap online apparel retailers have tried to restructure their businesses to focus on profitability.REAL has been a standout case. After issuing a five-year outlook in March 2022 that emphasized growth (virtually at all costs), REAL reversed its strategy in a bid to become EBITDA and free cash flow (FCF) positive as quickly as possible.In the process, it materially de- emphasized (1) its direct sales business, which was inherently lower-margin and exposed REAL to both pricing pressure and inventory risk, and (2) the lower-priced consignment items, which were loss-making from the get-go. 

The RealReal, Inc. - Not REALly Out of the Woods Yet; Initiating Coverage

RealReal Inc

The RealReal, Inc. - Not REALly Out of the Woods Yet; Initiating Coverage