The tight supply and soaring prices of new cars continue to have ripple effects on the market for used vehicles and on the companies that sell them. A set of disastrous financial results of the online used car company
highlights the problem.
Used vehicles and parts are more scarce because consumers who cannot find new cars to buy at rational prices keep their vehicles longer. Late Monday, Vroom said it lost 95 cents per share in the fourth quarter, more than Wall Street’s forecast of 77 cents, while gross profit per car sold fell nearly in half, to $473 from $878 a year ago. one year old. Vroom said the drop reflected higher acquisition costs for high-end vehicles, as well as higher refurbishment costs due to labor shortages and “high demand” for refurbishment services. third.
The larger-than-expected loss came even though revenue was $934.5 million, up 130% from a year ago, and ahead of Street’s consensus forecast of 901, $9 million. This includes $738.7 million from the company’s core e-commerce unit, up 159.2%. (The company also sells some cars wholesale and through more traditional outlets.) Vroom (ticker: VRM) sold 21,243 cars through the e-commerce segment during the quarter, up 92.7% from to the previous year.
To make matters worse, Vroom sees first-quarter revenue of $875 million, well below Street’s previous consensus of $1.04 billion. Management expects e-commerce unit sales to be between 18,000 and 19,000.
In response to the news, Wells Fargo analyst Zachary Fadem downgraded his rating on the stock to Equal Weight from Overweight, cutting his price target to $6 from $16. “We find our Vroom bull case increasingly difficult to defend,” he said in a research note. The sharp drop in gross profit per vehicle was “another operational misstep in a long series of forgettable results” since the company went public in June 2020, he said.
“While we are admittedly (and embarrassingly) slow to see the writing on the wall, we believe the macro narrative is too difficult, the operational hurdles seem too great, and the long-term earnings trajectory too uncertain to continue. to recommend actions,” Fadem said.
JP Morgan analyst Rajat Gupta, who has a neutral rating on Vroom shares, said the company also missed Street’s estimates for earnings before interest, taxes, depreciation and amortization, with a loss of $120 million. dollars, beating Street’s projection of a loss of $98 million. . There seems little hope for a near-term improvement in investor sentiment, given inconsistent execution, high spending levels and an outlook “which remains uncertain in a constrained labor and logistics environment.”
Vroom went public in June 2020 at $22 per share. It opened at $40.24, closing at a record high of $73.87 in September of that year, but continued to fall further and further. On Tuesday, the stock was down 42%, at $3.53.
Write to Eric J. Savitz at [email protected]