Long-term investors in automotive e-commerce platform RumbleOn (NASDAQ:RMBL) haven’t enjoyed robust gains over the past couple of years. Indeed, the share-price descent in RMBL stock has felt like a slow-motion car wreck.
If we examine the share-price movement, it’s hard not to maintain a pessimistic outlook on RMBL. A recent event may appear to have boosted the stock price, but upon closer inspection, that event won’t actually benefit RMBL shareholders.
Despite all of the foregoing, there might be reasons to own stocks in RMBL at its deeply depressed price. This isn’t an investment for everyone, but daring value-stock seekers might see a rare, if not guaranteed, opportunity in RumbleOn.
A Closer Look at RMBL Stock
A recent incident makes it challenging to properly assess the trajectory of the RMBL price. The event in question is a 1-for-20 reverse stock split that RumbleOn announced on May 19.
Reverse stock splits are sometimes used by companies to artificially inflate their share prices in order to maintain or regain listing requirements with trading exchanges.
That may have been the case this year with RumbleOn. Back in January, the Nasdaq exchange notified RumbleOn that the company was out of compliance because RumbleOn stock had closed below the $1 level for 30 days.
It’s fair to say that receiving a warning from Nasdaq isn’t a positive sign. Granted, the reverse stock split will likely keep RMBL in compliance for a while. Nonetheless, investors should monitor the share price carefully for further signs of trouble.
As of July 24, the RumbleOn stock price was slightly above $20, so it seems safe from delisting for the time being.
Shifting to an Online-focused Model
In a time when the novel coronavirus wreaked havoc on many businesses’ bottom lines, RumbleOn has had to adapt to a challenging automotive-market environment.
The industry-wide hardships were reflected in RumbleOn’s April total unit sales, which declined 66% from the sales posted in January. On the other hand, we can discern a rebound in May, when the company’s total unit sales increased by more than 22% compared to the lows printed in April.
Not only that, but RumbleOn anticipates a 26% increase in June’s month-over-month unit sales compared to April’s results.
RumbleOn CEO Marshall Chesrown fully acknowledges that a stronger focus on e-commerce dealers will be instrumental in facilitating the company’s continued recovery:
“Looking ahead, we are focused on the successful launch of the third generation of RumbleOn.com in Q3, which will improve powersport dealers’ ability to compete in a meaningful manner in online-only transactions while expanding RumbleOn’s opportunities for monetization…”
A Dealer-Centric Deal
Also contributing to RumbleOn’s recovery is a deal with online automotive marketplace CarGurus (NASDAQ:CARG). In a pilot program involving the two companies, CarGurus “will leverage RumbleOn’s technology as well as their transportation and distribution services” to enable dealers to source automobiles via the CarGurus platform.
It’s a savvy move on RumbleOn’s part as CarGurus has a massive online presence. CarGurus currently operates online marketplaces in United States, Canada and the United Kingdom.
Thus, the partnership with CarGurus demonstrates that RumbleOn is taking its renewed commitment to e-commerce-focused automotive dealers seriously.
Be advised, however, that this is nothing more than a pilot program for the time being. Neither of the two companies has formally announced an extension of the collaboration beyond this.
Still, the combination of CarGurus’ multinational reach and RumbleOn’s tech-enhanced platform could prove to be highly lucrative for both companies.
The Bottom Line
Any current or prospective investor in RumbleOn stock should be aware of the implications of the aforementioned reverse stock split. It’s probably not a good sign when a company artificially inflates its share price in this manner.
That being said, it’s encouraging that RumbleOn is working with a market leader like CarGurus. If the pilot program is made permanent, expect RumbleOn stock to embark on a smooth, steady ride to the top.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
