One of today’s most impressive movers happens to be Vroom (NASDAQ:VRM). Shares of the used car company have skyrocketed in today’s session, with VRM stock up more than 25% at the time of writing.
This move appears to be tied to increasingly bullish sentiment building in this space following key earnings from rival Carvana (NYSE:CVNA). Shares of CVNA stock rocketed more than 40% higher at one point today following incredible full-year results earlier today.
In fact, Carvana posted a full-year profit of $150 million for 2023, leading to a trailing price-earnings multiple of around 81-times. That’s not necessarily cheap, but if the company continues to see its bottom line improve to the extent it did last year, anything is possible.
Vroom is among the used car sellers that’s seen incredible downside over the past two years, as pandemic-related tailwinds turned into headwinds. However, despite shutting down its e-commerce operations and investors betting on the company seeking bankruptcy, there does appear to be some potential light at the end of the tunnel, given the results Carvana posted (and it’s a company that many investors put in a similar boat not that long ago).
Let’s dive into what investors may want to make of today’s move in Vroom.
VRM Stock Surges Following Carvana Earnings
Carvana’s surprise earnings (and first-ever annual profit) have sent a bullish signal to investors that the used car ecosystem may be normalizing. Yes, pandemic-related buying patterns may have reverted mostly back to pre-pandemic norms. But it’s also true that pricing dynamics have changed in a positive way, and companies like Carvana and Vroom have been forced to focus on efficiency.
Much of Carvana’s positive results can be tied to the company’s debt reduction program. Via cutting costs and focusing on its core business, the company was able to not only shatter expectations but raise its guidance moving forward.
With bankruptcy seemingly off the table for this peer, investors appear to be turning their attention to Vroom, a much smaller company but one with greater upside potential given its size. I’m not so sure Carvana’s results will correlate perfectly with Vroom’s core business. But today’s uptick certainly does improve overall sentiment for these related companies, as Wall Street analysts quickly move to upgrade CVNA stock on the news.
On the date of publication, Chris MacDonald 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.
