Vroom plunges 23% after releasing a weaker-than-expected forecast

ReutersFILE PHOTO: Automobiles are shown for sale at a car dealership in Carlsbad, California

  • Vroom on Wednesday reported quarterly earnings and gave an outlook that fell short of Wall Street’s expectations.
  • Shares of Vroom fell as much as 23% on Thursday.
  • The company lowered inventory when the coronavirus pandemic hit. “These lower inventory levels prevented us from fulfilling all of the demand that materialised in the second half of the quarter,” said Vroom CEO Paul Hennessy.
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Shares of Vroom tanked as much as 23% in intraday trading Thursday after the company gave an earnings forecast that fell short of Wall Street’s expectations.

Here are the key numbers:

  • Adjusted loss per share: $US2 per share reported, versus 55 cents (expected)
  • Revenue: $US253.1 million reported, versus $US234.9 million (expected)


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The company expects that in the third quarter, it will have a net loss between 37 cents and 42 cents per share on revenue between $US268 million and $US290 million. Analysts expected that the online used-car company would project a loss of 36 cents per share and revenue of $US344.6 million.

“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,” said Paul Hennessy, Vroom CEO, in a statement.

In the second half of the quarter, the company started to rebuild its inventory “as demand increased and pricing became more stable,” Hennessy said, adding, “These lower inventory levels prevented us from fulfilling all of the demand that materialised in the second half of the quarter.”

That demand may be driven by people buying up used cars as they move out of cities and into the suburbs amid the coronavirus pandemic, Hennessy told Reuters in a Thursday interview.

He also said that Vroom’s less-than-rosy third quarter forecast is due to falling average sales prices, which have taken a hit amid the pandemic as Americans become more hesitant to spend money.

Vroom has surged roughly 171% since its initial public offering in June.

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