JP Morgan downgrades Vroom stock, encourages shareholders to sell

JP Morgan analysts have revealed that there’s no easy fix to save online used car retailer Vroom and suggests investors sell their shares. Vroom shares are off 80% in 2022 and are 93% below their 52-week high.

Analyst Rajat Gupta downgraded the stock from neutral to underweight, along with competitor Shift Technologies, which is down nearly 64% this year. Gupta stated, “We continue to see a challenging backdrop for the used car industry and prefer companies that have ample liquidity and/or diversity in their business to navigate an uncertain macro backdrop.”

The used car retailer purchases and sells vehicles online without requiring customers to visit physical dealerships. Gupta stated that Vroom would need to slow cash burn, manage through a recessionary environment, and get closer to profitability so that investors can gain conviction again in the stock. Until then, JP Morgan will focus on traditional brick-and-mortar dealerships.  

“There is clearly no easy/quick fix or turnaround due to which we struggle with the investment case in the near to medium term,” Gupta said after considering the company’s future plans.  

Rising prices, increasing interest rates, and lessened demand have presented challenges for online car retailers this year. Both Vroom and its competitor company Shift had their stocks downgraded to underweight. Shift is down nearly 64% this year.

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