The Ratings Game: RealReal stock slumps after report on negative customer reviews

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The RealReal says it has a multi-point authentication process to avoid fake merchandise

Second hand luxury retailer RealReal Inc. saw its shares slump 8.5% Wednesday trading, bringing the week-to-date decline to 22.7%, after a CNBC report analyzing negative customer feedback found reports of damaged items, poor customer service and counterfeit merchandise.

“CNBC’s report does not accurately represent the depth of our team’s expertise and the thoroughness of our authentication process,” The RealReal REAL, -8.54%   said in a statement sent to MarketWatch.

“The RealReal has a rigorous authentication process, it is core to what we do and central to our brand,” the statement said. “If there is a question about the authenticity of an item purchased from The RealReal, we will always work with our customers to make things right. We stand behind both our process and authenticity guarantee, and will continue to provide a safe and reliable platform for buying and consigning luxury items.”

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The report follows a third-quarter earnings in which the company reported a 55% year-over-year sales increase.

On the call, RealReal Chief Executive Julie Wainwright talked about the company’s multi-point authentication process.

“We’re the only marketplace that authenticates a wide range of consumer products, and I would say without hesitancy… our practices are best-in-class and most importantly they continue to evolve,” she said, according to a FactSet transcript.

“They have to evolve because counterfeiters evolve.”

Analysts are bullish on the stock. KeyBanc Capital Markets rates The RealReal overweight with a $31 price target.

“Consumer demand for off-price luxury goods remains largely unsatisfied, and we think The RealReal uniquely taps into this demand,” analysts led by Edward Yruma wrote. “Awareness continues to build, which should drive significant long-term marketing leverage.”

See: Coty says its brands grew 40% on Amazon in the most recent quarter

Stifel analysts rate The RealReal stock buy with a $30 price target.

“The RealReal continues to make progress on its investments in automation, which are driving more consistent pricing and helping to drive operating leverage,” wrote analysts led by Scott Devitt. “We are encouraged by [Tuesday’s] report which showed accelerating growth and progress on the path to profitability.”

The RealReal reported a third-quarter adjusted loss of 27 cents per share and revenue of $80.5 million. The FactSet consensus was for a loss of 33 cents per share and sales of $75.9 million.

RealReal shares have fallen 25% over the past three months while the S&P 500 index SPX, -0.01%   is up 22.6% for the period.