Vroom (NASDAQ:VRM) stock might look cheap at first glance, but beware. There are definitely signs of trouble with Vroom, and I am bearish on VRM stock. In my opinion, this is one to avoid at all costs.
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Vroom operates an e-commerce platform for buying and selling vehicles. The company has to deal with fierce competition from more famous companies like Carvana (NYSE:CVNA) and CarMax (NYSE:KMX). That’s just one of the reasons to be concerned about Vroom, so let’s flesh out the bearish argument right now.
Too Many Red Flags for Vroom
Where to begin? I suppose we can start with the dreadful chart of VRM stock. This stock lost money for its investors last year, even while the major stock-market indexes finished in the green.
Next, there are the financial red flags. In 2023’s third quarter, Vroom’s net loss widened to $82.847 million versus a $51.127 million net loss in the year-earlier. Furthermore, Vroom’s quarterly revenue of $235.6 million fell short of the analyst consensus estimate of $239.1 million.
Also, Vroom is reportedly discontinuing its e-commerce used-vehicle operations. Vroom CEO Thomas Shortt stated, “Obviously, we are very disappointed with this outcome.” It sounds like this part of Vroom’s business just couldn’t get out of first gear.
Moreover, it looks like Vroom is going down the print-and-sell path, as troubled businesses often do. A filing indicates that Vroom seeks to effectuate an “at-the-market” offering of up to $50 million. The current shareholders probably won’t be happy about this due to the prospect of potential share-value dilution.
Finally, the Nasdaq (NASDAQ:NDAQ) exchange issued a noncompliance warning to Vroom because the company’s share price was under the minimum bid price of $1 for too long. This is generally a sign that a stock, and probably the company as well, isn’t in great shape.
Is Vroom Stock a Buy, According to Analysts?
On TipRanks, VRM comes in as a Hold based on two Hold ratings assigned by analysts in the past three months. Nonetheless, the average Vroom stock price target is $1, implying 281% upside potential.
Conclusion: Should You Consider Vroom Stock?
By now, you should have plenty of fodder for the bearish argument against Vroom. From the company’s less-than-ideal financials to the noncompliance warning from the Nasdaq exchange, there are just too many issues with Vroom. Consequently, I am absolutely not considering VRM stock now.
