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Vroom Sinks 12% As 4Q Outlook Disappoints; Stifel Says Buy
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Vroom Sinks 12% As 4Q Outlook Disappoints; Stifel Says Buy

Vroom shares tanked 12% in Wednesday’s extended trading session as the online used-car platform expects to post a larger-than-anticipated loss for the fourth quarter.

Vroom (VRM) forecasts 4Q revenue between $372 million-$414 million and a net loss per share in the range of $0.35-$0.41. Analysts had expected a 4Q loss per share of $0.36 on revenue of $399 million.

Meanwhile, the company beat analysts’ expectations for the third quarter. Vroom’s 3Q sales fell 5.1% year-over-year to $323 million but surpassed analysts’ projections of $311 million. The top line was hurt by a 63.9% decline in the revenue from TDA or Texas Direct Auto (the company’s sole physical retail location), which more than offset a 24.5% rise in e-commerce revenue and an 8.3% increase in wholesale business. The TDA business was impacted by pandemic-induced disruptions in the Houston area.

Vroom posted an adjusted loss per share of $0.29 in 3Q20 compared to a loss per share of $0.31 in 3Q19, while analysts had expected a larger loss per share of $0.37. (See VRM stock analysis on TipRanks)

The company stated that the demand for used vehicles returned to pre-pandemic levels in 3Q following initial disruptions in its e-commerce operations. Notably, Vroom experienced strong consumer demand for its e-commerce solutions and contact-free delivery.

Units sold through the e-commerce platform amounted to 8,823 in 3Q, marking a 58.6% year-over-year increase backed by higher consumer demand, rising inventory levels and stronger marketing efforts. Average monthly unique visitors to Vroom’s platform rose 19.4% to 928,277.

Following the earnings release, Stifel Nicolaus analyst Scott Devitt reiterated a Buy rating on the stock with a $65 price target saying, “Vroom is well positioned to deliver strong growth into and through 2021 against easy compares given the ramp in inventory and reconditioning capacity. Long term, our view is unchanged as we believe the opportunity stemming from higher eCommerce share of the used vehicle market remains attractive.”

The rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus breaks down into 9 Buys, 1 Hold and 1 Sell. The average price target stands at $68.22 and indicates upside potential of 67.2% from current levels.

Related News:
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Advance Auto Parts’ 3Q Profit Jumps 34%; Analyst Sticks To Hold
Cars.com Surpasses 3Q Estimates On Improved Online Traffic

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