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CarLotz: Industry Disruptions Likely to Affect Q3 and Q4, Says Top Analyst

Monday (Nov 8) will see CarLotz (LOTZ) step up to the earnings plate. The consignment-to-retail business will hope the market’s reaction this time around will be more favorable than it was after the release of this year’s other reports. Shares took the down escalator following both Q1 and Q2’s display. In fact, since making its public debut, the stock has endured a torrid time; shares are down by a dispiriting 68% since January’s SPAC merger.

Don’t pin your hopes on a different outcome, however, if Barrington’s Gary Prestopino’s take is anything to go by.

“We believe that Q3/21 and Q4/21 will be challenging for CarLotz as the macro environment and shortage of used vehicles will impact the company’s consignment business model,” the 5-star analyst said.

Prestopino expects revenue of $52 million with adjusted EBITDA of $(20.0) million, compared to the Street’s forecast of $54.5 million and adjusted EBITDA of $(20.8) million.

Given commercial consignment vehicle sourcing issues related to the ongoing chip shortage affecting the production of new vehicles as well as used vehicle supply, following Q2’s results the company took its 2021 guidance off the table.

In the meantime, CarLotz has stepped up the procurement of vehicles via wholesale auctions and less from commercial consigners, given the “disruption” in the commercial consignment used vehicle market. However, that has restricted the types of cars available for purchase to “lower aged vehicles with higher average price points” than in previous quarters.

“This difference in inventory has resulted in increasing average days to sale, increasing exposure to depreciation in selling prices, and lower unit sales,” Prestopino explained. “As a result of these factors, new hubs opened in 2021 have not been ramping to expected contribution to gross profit.”

Nevertheless, Prestopino is practicing patience and sticks with an Outperform (i.e., Buy) rating, while looking forward to a “turn in the used vehicle consignment market.” There’s also no change to the analyst’s $9 price target, which suggests strong gains of 136% over the next 12 months. (To watch Prestopino’s track record, click here)

Other analysts are more skeptical; with 2 additional Holds, the stock boasts a Moderate Buy consensus rating. However, the average price target remains a bullish one; at $8, the shares are expected to yield returns of 110% over the one-year timeframe. (See CarLotz stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.