Traders enthusiastically embraced Rent the Runway's announcement on Thursday, causing the company's shares to skyrocket by over 220%. The apparel rental firm's decision to leverage artificial intelligence (AI) tools to fuel its expansion plans in the current year caught the attention of investors. The surge in trading activity saw more than 34 million shares change hands, far surpassing the usual trading volumes of a company with a market value of only $26.27 million prior to the rally.

Rent the Runway joins a growing list of companies that have experienced stock rallies by highlighting their intentions to integrate AI into their business strategies. The company has forecasted a revenue growth range of 1% to 6% for the current fiscal year, compared to a 0.6% increase in 2023. Additionally, Rent the Runway expects to achieve breakeven free cash flow.

Investors view Rent the Runway as a representation of how AI can benefit small businesses, not just large corporations. Michael Ashley Schulman, Chief Investment Officer at Running Point Capital Advisors, noted that Rent the Runway has become the "poster girl" for this belief.

As a result of the surge, Rent the Runway's shares climbed by 138.7% to reach $17.82, elevating the company's market capitalization to about $63.3 million. Last week, the company executed a one-for-20 reverse stock split to comply with the minimum bid price requirement for continued listing on the Nasdaq. This move reduced the company's free float to approximately 2.6 million shares, as reported by LSEG data.

Rent the Runway primarily focuses on providing rental services for designer brands. However, the company experienced a decline in demand due to quality concerns and outdated product assortments. In 2021, the company went public with its stock priced at $21 per share.

CEO Jennifer Hyman expressed optimism about the company's future, highlighting a 10% year-over-year increase in customer loyalty during the fourth quarter. Rent the Runway also has plans to introduce new designer launches throughout 2024.

With Rent the Runway's bold adoption of AI tools and a promising revenue outlook, investors are keeping a close eye on the company's journey as it navigates the challenging apparel rental industry.