It’s time to talk about a lesser-known name within this bull market. Here is the breakdown of $VRM otherwise known as Vroom Inc.
Current Price: $58.00
52/Wk High: $72.68
52/Wk Low: $38.46
Read below for the breakdown! 👇🏽
Vroom Inc. is an e-commerce platform built towards and focused on the vehicle market. Vroom is a relatively new company to the stock market and just went public in June but that has not stopped the stock.
$VRM’s opening IPO price was $22/share and given that shares of $VRM are now trading at a whopping $58.32/share it makes many wonder why.
First off, even though the pandemic has slowed most of the economy the used car market has been on a role. While the pandemic slammed the auto market originally taking used car prices down 9% YOY in April along with new vehicle sales down 50% in April, the market quickly rebounded.
Soon after used vehicle prices rebounded strongly and prices hit new highs in both June and July according to Barrons.com.
Although the numbers for the overall vehicle market came back strongly, Vroom saw some major declines in Q2. The company reported that the average sale price of vehicles dropped by 17.4% and profit per unit declined by a whopping 43.2% (fool.com).
On the bright side, management expects to sell a total of 8,500 to 8,800 vehicles in Q3 which is roughly a 55% YOY gain according to fool.com.
While the vehicle market is going through highs and lows that has not seemed to stop the stock and there is not much of a reason that it should unless Vroom simply seizes its growth.
At the end of the day, $VRM is an online storefront for used vehicles which is very attractive given the e-commerce boom that is being seen throughout COVID-19.
According to nasdaq.com online sales only account for 1% of sales within the $85 billion used care market, leaving plenty of room for $VRM to grow.
Digging into the numbers $VRM reported an unfortunate miss for Q2. Vroom reported a $-2.00 EPS versus the $-0.70 EPS consensus. Secondly, revenue came in at a respectable $253.1 million representing a decline of 3%.
Further studying the balance sheet it is revealed that $VRM currently has $174 million in debt but a steady cash and short investment level of $218 million as of 12/31/19.
The guidance for Q3 also did not bode well with investors. Management expects Q3 revenue to decline by 15% to 21% which creates a revenue range of $268 million to $290 million.
While the numbers are not outstanding the analysts are very much on the bullish side of things. Currently, the mean price target for $VRM is $66.00/share representing a respectable 13.17% upside.
Secondly, the high price target is $80.00/share representing a 37.17% gain and the low is $48.00/share representing a sharp downside of -17.70%.
On the downside, the big money is quite bearish at the moment or in other words, not enthused. Currently, only 21.80% of the common stock is owned by institutions. Top holders include Arrowmark Colorado Holdings, Baillie Gifford & Co, and finally BlackRock Investment Management.
Finally, the technicals on the 6-month chart seem to be flashing an opportunity. After a disappointing earnings number, the stock has pulled back significantly.
Currently, the MACD is still in a downward momentum, the RSI sits at a lower 52.02, and the CCI is at a respectable -0.88. Given these few factors and the stock being roughly 14 points from its highs, the chart presents a somewhat attractive entrance.
Overall I think the stock is risky but given the current market sentiment on e-commerce platforms, I believe it has some potential to explode to the upside.
In short, if you are looking to buy into $VRM I recommend a close stop and scaling into a position.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply opinion based on independent research.