Rent the Runway shares get caught up in AI frenzy, surge over 200%

April 11 (Reuters) - Traders piled into shares of Rent the Runway (RENT.O), opens new tab on Thursday, sending the shares up by more than 220% after the apparel rental firm said it was betting on artificial intelligence tools to power its growth in the current year.

More than 34 million shares had changed hands, far surpassing the usual calm trading in a stock that coming into Thursday only had a market value of $26.27 million.

But numerous companies have kicked off rallies in their stocks over the last year by talking up their plans to use artificial intelligence to boost their businesses - and Rent the Runway is now the latest to join that frenzy.

The company has forecast revenue to grow between 1% and 6% in the current fiscal year, compared with a 0.6% rise in 2023, and expects breakeven free cash flow.

"Rent the Runway has just become the poster girl for investors that believe AI can help small business and not just large behemoths," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

Shares of the company were last up 138.7% at $17.82, giving it a market capitalization of about $63.3 million.

Last week, the company put into effect a one-for-20 reverse stock split to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq.

Following the move, it now has a free float of about 2.6 million shares, according to LSEG data.

Strong buying pressure on a low float stock is causing sharp pressure, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Rent the Runway, which focuses on selling designer brands, had seen a hit to demand due to quality issues and outdated product assortments. The company went public in 2021 and the stock was priced at $21.

CEO Jennifer Hyman said customer loyalty rate in the fourth quarter was up 10% year-over-year and the company has planned new designer launches for 2024.

Source: Reuters