Earnings

Vroom Stock Dives As Q3 Outlook Falls Short

Vroom app

Vroom Inc.’s stock fell by 18 percent at the opening Thursday (Aug. 13) as the New York City-based eCommerce car company beat estimates but its third quarter (Q3) outlook fell short.

The online used auto dealer reported an adjusted loss of 23 cents per share in the second quarter (Q2) on revenue of $253.1 million. Analysts expected a loss of 60 cents on revenue of $234.9 million.

Vroom said it expects Q3 revenue to be $268 million to $290 million, while Wall Street calls for $344.6 million, according to FactSet, the Connecticut-based data provider.

“In response to the drop in demand and uncertainty around vehicle pricing early in the pandemic, we chose to de-risk the business by significantly reducing our inventory during the first half of the quarter,” CEO Paul Hennessy said in a statement with the earnings release. “As demand increased and pricing became more stable through the second half of the quarter, we pivoted to start rebuilding inventory and continue to do so. These lower inventory levels prevented us from fulfilling all of the demand that materialized in the second half of the quarter.”

During Q2, the company said it managed through a roller-coaster ride of vehicle demand and operational challenges posed by the COVID-19 pandemic.

While the number of vehicles sold increased by 74 percent to 6,713 in Q2, up from 3,856 for the same period last year, gross profits for those vehicles fell by 57 percent to $2.1 million, down from $4.9 million in Q2 2019.

The Q2 results are the first since Vroom went public two months ago.

It was a different story on its first day of trading on June 9 when Vroom saw its shares more than double after the company raised $468 million for its initial public offering (IPO). The firm’s stock traded as high as $47.50, up 115.9 percent from the stock’s IPO price of $22. It later pulled back a bit to $44.10 shortly before the close, up 100.5 percent.

In an interview with PYMNTS in April, Hennessy’s outlook was bright. As brick-and-mortar businesses were forced to close their doors, the impact on Vroom was far milder. He said even in the turbulent times created by the coronavirus, consumers still want to buy and sell cars and are open to doing it online.

“The model is able to effectively deliver to every state in the country, and we’ve seen demand remain very strong because digital does exactly what consumers need it to at this time: deliver to their driveway … and settle the entire transaction end-to-end in a contact-free way,” Hennessy said.

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