No one likes bad news and investors are quick to show their disapproval when a company disappoints. In the case of CarLotz (LOTZ), the consignment-to-retail business’ latest update has only added to the stock’s previous woes. Already 50% into the red year-to-date, the latest news sent more shareholders scurrying to the exit gates.
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Before Wednesday’s open, the company trimmed back its revenue outlook for the year along with vehicles sold and gross profit estimates.
The pared back expectations are due to a halt on consignments from its largest commercial vehicle sourcing partner, which during 1Q21 accounted for over 60% of cars sold and sourced. To-date in Q2, they have made up less than 50% of cars sold and roughly 25% of sourced vehicles.
Soaring wholesale vehicle prices are behind the shift away from CarLotz; compared to historical norms, wholesale auctions are currently more profitable for the sourcing company. Plus, the ongoing impact of the global chip shortage is impacting inventory sourcing at, similar to the problems faced by much of the used vehicle industry.
For 2021, revenue is now expected to come in between $272 million and $317 million, compared to the $335 million to $375 million range before. Retail units sold are anticipated to drop from between 18,000 to 20,000 to between 13,000 to 15,000 and the gross profit forecast has been reduced to between $20 million to $26 million vs. the previous $30 million to $37 million estimate.
“All in all, this is not good news,” said Barrington’s Gary Prestopino, although the analyst went on to add the issue could be a plus in the long run.
“We do believe that in terms of creating more of an urgency to diversify corporate consigners as well as overall sourcing partners, this will have positive long-term implications for the company,” the 5-star analyst opined.
That said, while Prestopino still thinks the business model is “viable” and represents a “significant growth opportunity,” the company now has a lot to prove to doubtful investors.
“CarLotz has now become a show me stock in the eyes of investors as issues in terms of retail GPU and sourcing concentration have now come to the forefront,” Prestopino summed up. “The company needs to show investors it can consistently execute within its plan for long-term growth.”
As such, Prestopino also went down the haircut route, and cut back the price target from $19 to $16. Still, the latest bloodbath means the revised forecast could generate gains of 256% over the next 12 months. Prestopino’s rating stays a Buy. (To watch Prestopino’s track record, click here)
One other analyst has thrown the hat in with a CarLotz review recently, also considering the stock a Buy. Therefore, LOTS has a Moderate Buy consensus rating. (See LOTZ stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
