By Brian Lantier, CFA
NYSE:RERE
READ THE FULL RERE RESEARCH REPORT
Before the market opened on March 11, ATRenew (NYSE:RERE) released its fourth-quarter and full-year results for 2025, demonstrating that the company's deep consumer connection and market penetration can enable it to thrive even in challenging operating environments. Despite smartphone shipments falling slightly in China last year, the company's position as the premier destination for consumers to recycle their previous-generation smartphones enabled it to capitalize on strong upgrade cycles, particularly among Apple iPhone users.
The Apple iPhone 17 was released on September 19, and strong demand in China enabled Apple to reclaim its lead as the top smartphone manufacturer in the fourth quarter of 2025, with 22% market share. The popularity of this iPhone model led to a strong upgrade cycle among current iPhone users who owned older models, reversing a trend of declining sales in the Chinese market for Apple. The base model iPhone 17 was priced at RMB5,999 to ensure it fell within the Chinese government's subsidy guidelines for consumer electronics upgrades, including smartphones priced under RMB6,000. At this point, it is unclear whether Apple's resurgence in the Chinese market is sustainable or whether this was merely a bump driven by a larger-than-normal upgrade cycle coinciding with smartphone subsidies for models priced under RMB6,000.
Total net revenues at ATRenew jumped 29% from the same period of 2024 to RMB6.25 billion ($894 million) and were up 21.5% sequentially from the third quarter of 2025 due in large part to the surge of iPhone 17 sales which led to large number of trade-ins of older iPhone models and several android model updates from companies like Oppo, Huawei and Vivo. Total revenues for ATRenew exceeded our forecast by 2.2%, or RMB134 million, principally due to increased unit volumes and higher pricing across the full spectrum of pre-owned smartphones, driven, in part, by higher memory costs. The company's net service revenues were up 8.8% year over year in the fourth quarter of 2025 but essentially flat sequentially. Strength in some segments of this business (particularly the company's gold business) may have been offset by weakness in consumer spending on other items, such as luxury goods.
The company's 1P business (First Party sales, where ATRenew acts as the retailer of goods to consumers) posted a gross margin of 13.7% in the quarter, up from 12.5% a year ago. The company attributed this improvement to efficiency gains in consumer-to-business sales and a more diversified retail channel sales mix.
The balance of the company's operating expenses were roughly in line with the higher volume of sales, and as a result of a slight improvement in margins, ATRenew reported GAAP net income of RMB130.3 million for the quarter ($18.6 million). After adjusting for non-cash share-based compensation expenses of RMB9.1 million in the quarter and small amortization of intangibles (RMB783 thousand), adjusted non-GAAP income was reported at RMB140.1 million or $20.0 million for the quarter or $0.08/ADS, in line with our projections.
We believe that investors are likely to revalue ATRenew during 2026, with an eye toward 2027, and when there is greater clarity regarding the next iPhone release dates. The stock has performed extremely well over the past six months, roughly doubling in that timeframe, and we believe there is upside to our forecasts in the back half of 2026, but for the time being, we are leaving our target unchanged at $8.00/ADS. With the stock trading at just 13.6 times our 2026 adjusted earnings per ADS estimate and offering a 1.8% dividend, we believe ATRenew offers a unique small-cap growth value in the market.
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