What should we expect from the earnings? - revenue growth! last quarter their Ecommerce revenue was $738.7 million, up 159% year over year; gross profit was also up a lot, 64% YoY! - a strong financing business! On February 01, 2022, Vroom announced the successful completion of its acquisition of United Auto Credit Corporation (UACC), a proven leader in automotive finance for $300 Mil.
Soon after the news above was released, on 2/3/2022, Bank of America set a price target for VRM of $30.00 So how come it is trading at $1.66???
Well, 29.48% of the share float is Shorted! Big institutional owners like Vanguard, Blackrock , Morgan Stanley , JPMorgan Chase have average entries at $40! And many of them had recently averaged down their investment, like Goldman Sachs which reported on 2/17/2022 an increase of 104.5% in their ownership in VRM , respectively 1,753,977 shares worth 18.93Mil for a total of 1.281% of the company. Their average is now $22.55. So if they are happy with a 22 average, how come we don`t we buy it at $1.66?
VRM has a Price to book ratio of 0.24 now. A P/B ratio less than 1 means that the stock is trading at less than its book value, it`s way undervalued! the Price to Sales ratio is only 0.07! By comparison, its rival, CVNA (Carvana), has a P/S of 1.16. Based on Q4 Financials, If they liquidated the inventory, cash in on all receivables and pay off the 600M senior note, each shareholder will receive approximatively $6.5 per share.
If we look at the daily timeframe , VRM formed a falling wedge pattern which is extremely bullish as you know, on an oversold area, 25 on the RSI .
Institutional ownership in VRM is high, 92.19% 52 Week Range 1.58 - 48.80 Market Cap of only 235.47Mil! Can be a buyout at this point! 2021 Revenue: 3.18Bil
All things considered, fundamental and technical analysis, my short term price target for VRM is $5.95, i think it`s trading so low because it`s heavily shorted by the hedge funds, to have a better average on their entry.