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Shares of Vroom dropped 14.8% in Wednesday’s extended trading session as the online used-car platform reported worse-than-feared 4Q losses and forecasted wider losses for 1Q. Meanwhile, 4Q revenues beat the Street’s estimates.
Vroom (VRM) reported 4Q revenues of $405.8 million that topped consensus estimates of $402.4 million. Revenues grew 14.1% year-over-year, driven by a 43.1% rise in e-commerce revenue growth and an increase of 57.3% in wholesale revenues. However, a 57.9% decline in revenue from TDA or Texas Direct Auto (the company’s sole physical retail location) adversely impacted its top line.
The company said, “the consumer demand for used vehicles now exceeds pre-COVID-19 levels and, in the quarter ended December 31, 2020, we experienced continued strong consumer demand for our e-commerce solutions and contact-free delivery.”
Vroom posted an adjusted loss per share of $0.44 in 4Q20 compared to a loss per share of $0.33 in 4Q19, while analysts had expected a loss per share of $0.39. (See Vroom stock analysis on TipRanks)
As for 1Q, the company expects to generate revenues in the range of $500-$529 million, compared to the consensus estimates of $509.9 million. Furthermore, the company expects triple-digit year-over-year growth in e-commerce unit sales for 2021.
However, Vroom foresees a 1Q loss in the range of $0.61-$0.68 per share, significantly wider than analysts’ expectations for a loss of $0.39 per share.
Following the results, Wells Fargo analyst Zachary Fadem maintained a Buy rating and a price target of $60 (37% upside potential). In a note to investors, the analyst said, “we believe the Q1 bar was set sufficiently low, and shares should work with evidence of gradually building unit performance and stabilizing GPU [gross profit per unit]. All in, our positive FY21 thesis still stands, but given ongoing execution hiccups, we are tapping the brakes in the near term.”
Overall, the Street has a cautiously optimistic outlook on the stock, with a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average analyst price target of $53.25 implies upside potential of over 21% to current levels. Shares have declined about 8.4% since it was listed on NASDAQ on June 9, 2020.
Furthermore, TipRanks data shows that financial blogger opinions are 71% Bullish, compared to a sector average of 69%.