Is ThredUp (TDUP) Still a Buy After Its 500%+ Surge? Valuation Dislocation and Long-Term Growth in the Secondhand Retail Sector

The recent 500%+ surge in ThredUp (TDUP) has left investors grappling with a critical question: Is this stock still a buy, or has it become a speculative bet on a market that may not deliver? To answer this, we must dissect the interplay between ThredUp's valuation dislocation and the explosive growth potential of the secondhand retail sector.

Valuation Dislocation: A Tale of Optimism and Skepticism

ThredUp's stock currently trades at $8.72, with a market capitalization of $1.09 billion according to market data. Its price-to-sales (P/S) ratio of 3.48 is starkly higher than both its peer average of 0.9 and the industry average of 0.5 as reported by analysts. Analysts estimate a fair value of $16.54 per share, implying the stock is trading 47.3% below intrinsic value based on financial analysis. However, this assessment hinges on a critical caveat: ThredUp remains unprofitable. Its price-to-earnings (P/E) ratio of -17.99 as of October 2025 reflects ongoing losses, with a 12-month average P/E of -8.55 according to financial reports. The jump in the P/E ratio suggests investor optimism about future earnings, but it also underscores the risk of overvaluation in a company that has yet to turn a profit.

The disconnect between ThredUp's valuation and its financial performance raises questions. A P/S ratio of 3.48 implies investors are paying a premium for each dollar of revenue, even as the company's adjusted EBITDA of $8.7 million in 2024 as disclosed in earnings (3.3% of revenue) contrasts sharply with a net loss of $40 million reported in Q4 results. This dislocation could persist if the market believes ThredUp's gross margins as reported in financials (79.7% in 2024) will eventually translate into profitability. Yet, with orders declining by 1% year-over-year in 2024 as per financial disclosures, the company's ability to scale sustainably remains unproven.

The Secondhand Market: A Gold Rush with Structural Tailwinds

The secondhand apparel market is undeniably in a growth phase. The U.S. market, valued at $59 billion in 2025, is projected to reach $74 billion by 2029, driven by a 14% annual growth rate. Online resale, in particular, is accelerating, with the segment expected to nearly double to $40 billion by 2029 according to industry reports. Consumer behavior is shifting rapidly: 59% of shoppers would prioritize secondhand purchases if tariffs make new apparel more expensive as reported in the ThredUp report, and 55% of Gen Z and Millennials refuse to buy new if an item is available secondhand per market analysis.

ThredUp's role in this transformation is pivotal. According to its 2025 Resale Report, AI and social commerce are reshaping the industry, aligning with broader trends. For instance, 46% of consumers say AI improves the ease of secondhand shopping as noted in the report, a capability ThredUp has integrated into its platform. Yet, the company faces stiff competition. Poshmark, Depop, and even traditional retailers like Walmart and H&M are expanding their secondhand offerings as reported in market analysis. ThredUp's dominance is not guaranteed, especially as the market becomes increasingly crowded.

Financial Realities vs. Market Hopes

ThredUp's 2024 financials reveal a mixed picture. Revenue grew 1% to $260 million, driven by strong gross margins, but the company's net loss of $40 million (15.4% of revenue) highlights operational inefficiencies. While Q4 revenue rose 9% year-over-year as reported in earnings, the 1% decline in annual orders suggests challenges in retaining or acquiring users. This is a red flag in a sector where scale is critical.

The company's Adjusted EBITDA of $8.7 million offers a glimmer of hope, but it masks the reality of a business that is still burning cash. For ThredUp to justify its current valuation, it must demonstrate that it can convert its revenue growth into consistent profitability without sacrificing market share. The path to profitability will require not just cost discipline but also innovation-something the company has shown in its adoption of AI and social commerce as highlighted in industry reports.

Conclusion: A High-Risk, High-Reward Proposition

ThredUp's valuation remains a puzzle. On one hand, the secondhand market's explosive growth and the company's leadership position suggest long-term potential. On the other, its current financials and competitive landscape paint a picture of a business that is far from a sure bet. The stock's 43.35% upside potential, as reflected in the $12.50 average price target according to market analysis, hinges on ThredUp's ability to execute its vision and navigate a rapidly evolving market.

For investors, the key question is whether the company can bridge the gap between its lofty valuation and its operational realities. If ThredUp can scale its margins, retain users, and outpace competitors, the stock could deliver outsized returns. But given its current trajectory, the risks of overvaluation and execution failure are significant. In a market where affordability and sustainability are reshaping retail, ThredUp's future is far from certain-but for the bold, the rewards could be immense.