VRM - Despite Recent Uptick Vroom Lacks Pulling Power
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While no one would want a repeat of the terrible coronavirus pandemic, it must be said that at least some businesses like Vroom (NASDAQ:VRM) cynically benefitted from the radical paradigm shift. As the global health crisis shut down supply chains everywhere, VRM stock suddenly became powerfully relevant. The underlying company, which specializes in online used-car sales, now had customers ringing their phones off the hook.
However, as the public gradually acclimates to the new normal — and especially as fears of Covid-19 fade away — VRM stock is now under the glare of skepticism. True, the security popped higher to the tune of nearly 4% in the April 19 session. However, on a year-to-date basis, Vroom has hemorrhaged a shocking 83%, making it one of the worst performing publicly traded companies of 2022.
And it’s not just a matter of unfavorable arbitrary timing. In the trailing year, VRM stock is down over 95%. Take too many more losses and a complete implosion is not out of the picture.
Nevertheless, it’s a sad situation because Vroom really should be doing better. Fundamentally, the winds favor VRM stock to an extent. As the Wall Street Journal pointed out, the cars on American roads are increasingly aging, thus incentivizing a pivot toward new (or new-ish) car purchases. Another WSJ article mentioned that Russia’s attack against Ukraine sparked upheaval in the global auto supply chain.
The overwhelming majority of Americans use their personal vehicles to commute to work or school. As companies start recalling their employees back to the office, this demand profile may return to pre-pandemic norms. Again, it should be a positive for VRM stock.
So, what’s the issue? No matter how positive the outside fundamentals are, net losses continue to widen for Vroom. Change this narrative and it’s possible that VRM stock could regain momentum. But until that changes — and this is arguably a very low probability event — Vroom will likely be an extremely speculative idea.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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