New York City-based online used-car retailer Vroom, Inc. (VRM) has benefited from strong market demand for used vehicles and skyrocketing prices over the past year, caused in part by a global shortage of semiconductor chips and delays in new car manufacturing. Ecommerce units sold in its fiscal fourth quarter increased 92.7% year-over-year to 21,243, while VRM sold 74,698 units in 2021, up 117% year-over-year. The company has also been expanding its market footing, rolling out more of VRM’s Last Mile hubs across the country over the past months, with more than 30 launched so far.
However, VRM posted a wider-than-expected loss in the fourth quarter, despite solid topline growth, due to lower margins and higher reconditioning costs due to labor shortages and higher demand for third-party reconditioning companies. Also, the company expects its first-quarter revenue to come in at $875 million, well below the previous $1.04 billion Wall Street consensus. Following the news, Wells Fargo analyst Zachary Fadem slashed his price target to $6, from $16. “We believe the macro narrative is too difficult, operational hurdles appear too great, and long-term profit trajectory too uncertain to continue recommending shares,” Fadem said.
