As we navigate past the pandemic I am bullish on Revolve Group, Inc. (NYSE: RVLV). Just a bit about Revolve, from their website on the investor relations page:

“REVOLVE is the next-generation fashion retailer for Millennial and Generation Z consumers. As a trusted, premium lifestyle brand, and a go-to online source for discovery and inspiration, we deliver an engaging customer experience from a vast yet curated offering totaling over 49,000 apparel, footwear, accessories and beauty styles.“

Revolve Group, Inc. – Investor Relations

When I evaluate a company, I try not to look at the stock price, I look at the fundamentals of the company. Where will Revolve be in a year, five years, a decade, longer?

In my quick analysis, I believe Revolve is the future of fashion retail. E-commerce sales in 2021 account for roughly 18-19% of total retail sales. Over time that number will only get bigger and Revolve is already years ahead of their competition. They utilize social media influence marketing which their competitors are just starting to incorporate. Investing in RVLV is essentially buying a long-term call option on E-commerce growth, Social Media growth, and Influencer marketing, all trending upwards.

I own RVLV stock. It makes up the highest percentage of my portfolio. Now it wasn’t the biggest when I bought it aggressively in early 2020, but I don’t plan on selling any of my shares anytime soon. I will admit, the past six months I have been tempted to sell at least a portion of my position as the stock price dramatically increased but the more I evaluate the company, I see no reason to.

Anytime you are considering buying a stock, you should have at least a few fundamental reasons why, aside from the stock price. Here are a few of my whys:

• The secret sauce of Revolve is in its technology/AI/data analytics

Competition in this space is fierce however Revolve uses social media and influencer marketing which gives it a leg up over its competition. Sure, other fashion retailers will eventually adopt these sale marketing strategies but this is what Revolve has already been doing and their E-commerce presence is strong and growing. Just to give a comparison, on Revolve’s official Instagram page, they have 4.7 million followers, compared to Lululemon, 3.7 mil, Nordstrom, 3.4 mil, and The Gap, 3.1 mil.

While these fashion retailers are playing catch up, Revolve’s brand will only get stronger. Brand name recognition in retail is vital. Last year, for example, I won a free Yeti cooler that was retail worth $200. I sold that Yeti Cooler for its retail cost. Now, why a consumer would pay $200 for a Yeti Consumer instead of a Coleman cooler worth about $50? I cannot provide a logical answer however based on Yeti’s sales, that just shows you the power of a strong brand name. Using an example of another fashion retailer, Lululemon sells sweatpants/yoga pants for over $100 and they have consistent growth. This shows a strong Brand name + Successful marketing = Really good gross profit margins and higher average order value. There is no need for Yeti to discount their coolers or for Lululemon to mark down on yoga pants. Revolve’s juicy margins are a big reason why they have an impressive financial balance sheet.

• This is a Warren Buffet type stock:

Warren Buffet touts companies with strong management teams, consistent cash flow/revenue, and minimal debt. This fits Revolve to a tee. A management team with a strong financial/analytical background in an industry that has relied too heavily on art/trends instead of science/data. A company with nearly zero debt with consistent revenue growth.

• Post pandemic recovery with catalysts in play:

Revolve was hit hard by the Pandemic. Although they are an e-commerce retailer that survived and stayed strong financially last year, they aren’t Amazon. What is impressive is that they found revenue growth outside of festivals and live events during the shutdowns and closures. As things open up, they should experience a boost in sales like most consumer cyclical companies. Revolve festivals will return and management should consider better monetizing/expanding when the pandemic eases up. International expansion and Revolve’s men section, “FWRD Man,” are only in the beginning stages and represent future growth catalysts for this company.

If you are a middle/upper class female millennial or early Gen Z you probably know why Revolve is successful. This company speaks to that demographic. For everyone else, you might be scratching your head wondering how Revolve is different from the thousands of other fashion retailers. The reality is FOMO celebrity trends are real. People will pay $500 for a Balenciaga T-shirt or over $4,000 for a Valentino dress and that won’t change anytime soon. Revolve through their technology can predict the right trending items and stay financially consistent, which shows in their steady quarterly sales growth.

Revolve is a great company in its early stages. I don’t know if they have enough catalysts or growth ahead to create generational wealth like Tesla or Amazon, but I view them as a relatively safe mid-tier growth company with mid-level risk in the upcoming five years. If you believe in future E-commerce growth and social media being more prevalent in society, Revolve will be there alongside to reap the rewards. This is a really exciting time to be a Revolve shareholder as they are just entering their high-growth period. Meanwhile, traditional retailers are playing catch-up. As long as management continues to execute, the Revolve empire will stand strong by the end of this decade.