Vroom (NASDAQ:VRM), a growing leader in the ecommerce driven used car market, gained 11.9% in premarket trading today, and has held onto some of those gains going into trading today despite what looks like some profit-taking seen. An increasingly positive analyst outlook and some improving numbers from a recent earnings report—along with a consumer market that's favoring used cars—are contributing to gains in the company's share price.
Vroom Earnings Report Delivers Solid Results
The Vroom earnings report told a story of narrowing losses and improving gains. The company posted a net loss for the quarter of $0.57 per share, which was solidly under the FactSet analyst consensus of a loss of $0.63 per share. This also compares very well to the same time last year, when the company posted a net loss of $4.85 per share.
Revenue also turned in a beat as the company posted $591.12 million against FactSet projected revenue of $517.2 million. This too compares well against this time last year, when the company posted revenue of $375.77 million.
Remarks from Vroom CEO Paul Hennessy noted that the company's improving fortunes are attributed mainly to “exceptional growth and improving unit economics.” The company's near-term goals, Hennessy also explained, will focus on improving inventory and “reconditioning capacity,” along with further improvement in its ecommerce operations, where the company does the bulk of its sales.
Overall market conditions are likely contributing here as well, as demonstrated by the recent performance of one of Vroom's biggest rivals in the space. Shift (NASDAQ:SFT) posted a premarket gain of 8.1% amid similar results to Vroom's. Reports suggest that more consumers are turning to used cars amid an ongoing shortage of chips that is limiting new car production, meaning used car dealers like Vroom and Shift are seeing increased demand.
What are Financial Analysts Saying About VRM Stock?
Meanwhile, the word out of financial analysts is currently bullish, and has been so for most of the last year. Vroom shifted from a consensus “hold” to a consensus “buy” back in June 2020.
Back in August 2020, Vroom had nine “buy” ratings and one “hold” to its credit. Three months ago, that shifted to 12 “buy” ratings, three “hold” and two “sell.” Today, we now have 13 “buy” ratings to go with the three “hold” and two “sell.” While the ratios are not as purely bullish as they were previously, there's still a clear majority of analysts interested in buying in on Vroom stock.
The company's price target has a fairly broad range to it, with the current average of $56.86 bookended by a high target of $70 and a low target of $43. Action for this year, so far, has been somewhat mixed, with three analysts raising their price targets and five lowering them.
March 4 proved a gloomy day for Vroom, as four different analysts—Truist, Stifel Nicolaus, Wedbush and Jefferies Financial Group—all lowered their targets that day. Earlier today, Piper Sandler joined that rush, dropping its target from $60 to $58. Word from Piper Sandler analyst Alexander Potter noted that Vroom is increasingly a “show me” story. However, today both JMP Securities and Raymond James increased their targets, with JMP going from $48 to $55 and Raymond James increasing from $47 to $53.
New reports suggest that Vroom has only recently entered oversold territory, with NASDAQ.com's Relative Strength Index (RSI) noting that the company stood at a 29.5 in trading yesterday. A rating of 30 or lower is to be considered oversold, NASDAQ.com elaborates, and suggests that potential investors begin looking for a buy-in mark.
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