Rent the Runway Stock Surges, Showing Investors' Favoritism for Artificial Intelligence

"Rent" the flyover? Not this week. Investors just want to buy.

Shares of Rent the Runway (RENT) hit a new 2024 high on Friday, with a monthly gain of more than 260%.

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As investors look for opportunities to put their money on the AI hype train, the AI craze has taken hold, and Rent the Runway's chief executive officer, Jennifer Hyman, said on an investor call Thursday that the brand has used AI technology to boost consumer confidence.

"In 2023," she explained, "we made significant strides in the performance and speed of our site, making it easier for users to find their favorite items through enhanced discovery features like Rent the Look, AI search, new filtering capabilities, and upgraded photography and styling.

Some of the features mentioned seem to allow companies to double down on personalization, which brands and retailers alike see as a potentially transformative use case for AI technology," she explained. According to Twilio's latest data, more than three-quarters of business leaders say that personalized customer engagement will continue to be a "high or critical priority" in 2024.

Hyman said RTR has benchmarked loyalty.

"Throughout 2023, we made tangible improvements in customer engagement that are showing up in our metrics. The Subscription Net Promoter Score reached its highest level in several years, improving 20 points from a low in Q2 2023 to a high in Q4 2023, and it continues to do so. Customer loyalty also increased 10% year-over-year," she told investors on the call.

Hyman said the company will continue to focus on "digital product innovations" in 2024, 鈥竝hey will use these innovations to continue to drive consumer and subscriber conversion rates and loyalty.

RTR reported a 0.6% year-over-year increase in AI segment revenue.

The conference call wasn't the first time the rental brand has acknowledged the company's plans for artificial intelligence and emerging technologies.

Last June, the company highlighted a feature that investors are very excited about this week in its Q1 2023 earnings report, noting that it had "made foundational investments in artificial intelligence."

"[RTR] has taken an important first step in improving RTR's search and discovery efforts using artificial intelligence models by developing a beta version of AI-enabled search," reads last year's Q1 announcement." The feature will allow customers to utilize RTR's existing search tools and product catalogs using common phrases or fashionable terminology designed to make the process of discovering products more intuitive and natural."

Although RENT's stock price rose on June 7, the day of the announcement, investors didn't buy as much as they did this week.

While AI and digital transformation have certainly rekindled investor interest this year, the company also deserves credit for its bright prospects. According to its fourth-quarter 2023 announcement, RTR expects revenue growth of 1% to 6% in FY2024 over FY2023, and it also forecasts adjusted EBITDA margins of 15% to 16%.