Vroom stalls out
VRM $3.25 (▼46.55%) Vroom Inc | Google Finance
Used car prices are crazy these days, we're talking Britney level just trying to keep it together in front of the conservatorship judge crazy. So an e-commerce platform that specializes in pre-owned vehicles should be killing it right now right? Not so much for Vroom (VRM), which reported a soiled diaper of a quarter on Tuesday, sending the stock down more than 46% on the day. In other automotive news, my wife has informed me that she would like to trade in our 2011 Toyota Highlander for a new Chevy Tahoe. Thoughts and Prayers would be appreciated in these trying times.
- The company lost $0.95 per share, which was worse than estimates of $0.77 per share. Gross profit per car sold fell off 50% from a year ago, coming in at $473. Is that it?
- The profit decline was due to a higher acquisition cost for premium vehicles, so I guess the good people at VRM haven't figured out the concept of passing costs along to customers.
- VRM also committed the cardinal sin of lowering guidance, cutting Q1 revenue forecasts to $875M, down from previous estimates of $1.04B, sparking analyst downgrades. Why do these analysts always cut their targets after bad things happen? If they were any good wouldn't they see these things coming?
With new and used car prices bonkers right now, shoppers might want to consider just buying VRM instead. I don't mean shares, but the whole company since after today's reckoning you could purchase the whole entity for about $445M, or roughly equivalent to a low mileage 2015 Nissan Armada. Since going public in the summer of 2020, Vroom's performance has been more Geo Metro than Tesla, so the only compelling reason for me to sniff around shares right now is if I have a hunch it might get taken out at a slightly higher price.
Target came to kick a$$ and chew
bubblegum
Target (TGT) is no pandemic piker like Peloton (PTON) or Zoom (ZM). The big box retailer certainly made the most of the 104 weeks to slow the spread but expects to keep the good times rolling as we get back to normal life (assuming spring doesn't become nuclear winter of course). The company reported sales growth of 9% for Q4 2021 and also said it expects to see revenue keep trending up despite inflation pressures and supply chain constraints. Look for Kool & The Gang to perform at the next annual shareholder meeting.
- EPS came in at $3.19 vs. estimates of $2.86 on revenue of $31B vs. expectations of $31.39B. Shares gained 9.9% on Tuesday in response to the upbeat outlook.
- Target is one of the retailers getting omnichannel right since their stores also function as fulfillment centers, with in-store and curbside pickup options as well as utilizing Shipt for home delivery.
- The company also plans to push further into the store within a store concept, with Starbucks, Ulta Beauty, Apple, and Disney sections located throughout the store footprint.
Target has been on an Alabama football like run since the pandemic started, up 84% since March of 2020. It's tempting to think that the ship has already sailed, but do you find yourself (or your spouse) spending more or less money at Target now compared to a few years ago? The company looks to be a leader in omnichannel retail and has figured out how to use its brick and mortar locations as multi-use assets in the war against Amazon (AMZN).
EVs Looking Better By the Day
Crude oil futures skyrocketed Tuesday to levels not seen since June 2014 as Russia's invasion of Ukraine continued to intensify. West Texas Intermediate crude, the U.S. benchmark, finished Tuesday's trading session up 11.1% to easily close above the psychological $100 threshold at $106.34. The rally in oil pushed big name energy sector stocks such as Occidental Petroleum (OXY), Chevron (CVX), ConocoPhillips (COP), and Exxon (XOM) all higher by between 1.38%-7.68%. Oil related ETFs joined the party as well with the United States Oil Fund (USO), the S&P Oil & Gas Exploration Fund (XOP), and the Select SPDR Energy ETF (XLE) up between 1.29%-7.26% on the day.
- The U.S. and other member countries of the International Energy Agency (IEA) agreed to release 60M barrels of oil to try and slow the price increase. The announcement did little to stem the rise as investors continued to buy any intraday dips in the commodity. By the way, 60M barrels represents less than one day's worth of global demand. Do better IEA!
- The Biden administration also appealed to Saudi Arabia to increase their daily production which as of now has fallen on deaf ears.
- A full Russian oil embargo is possible if fighting continues to accelerate which in turn could drive oil even higher. Crude futures are currently in a state of backwardation which is a scenario where the front month's contract is priced higher than future contracts, thus signaling tight oil supply.
With geopolitical events like the one happening in Ukraine, looking for levels of support and resistance become secondary to the release of news. That said, it is imperative to keep a watchlist of energy sector stocks and ETFs on hand to give us a sign as to where the energy market may be heading next.
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