Sliding Revenue Could Shift Into Reverse

Not long ago, Vroom (NASDAQ:VRM) stock garnered attention in the financial press. Reportedly, Bill Gates’s organization, the Gates Foundation, took a stake in the New York-headquartered digital car-buying platform.

However, individual investors must make their own decisions. Besides, based on Vroom’s financials, it looks like the company is having major problems.

Celebrity status can enhance the appeal of charitable organizations. If the Gates Foundation makes an investment, many traders will pay attention. If they look up to Gates, they may be tempted to mimic his foundation’s stock purchases.

However, if there’s no way to know exactly why the Gates Foundation made a particular stock purchase, then individual investors should be cautious. It’s better to conduct your own due diligence on a company – and in the case of Vroom, some basic research will uncover a number of problematic data points.

What’s Happening with VRM Stock?

Going back to where it all started, Vroom went public in 2020 at $22 per share. There was a quick burst of hype from the trading community, but it was short-lived.

Over the past couple of years, VRM stock has been in a persistent downtrend. By Aug. 15, the share price was below $2. Certainly, Vroom’s early investors must be frustrated now.

The Vroom share price surged recently, though, hitting $2.30 briefly. However, even that pop was temporary as the shares fell right back below $2.

That quick spike in VRM stock seems to have a couple of catalysts. For one thing, relatively low-priced stocks like Bed Bath & Beyond (NASDAQ:BBBY) stock have been the targets of a meme-trade resurgence. Hence, it’s possible that Vroom got caught up in the recent wave of short-squeeze mania.

Concurrently, a quarterly 13-F filing from the Gates Foundation revealed a sizable purchase (or purchases) of Vroom shares during this year’s second quarter. Again, however, it should be emphasized that the foundation’s reasons for investing in Vroom aren’t known.

Vroom Is Unprofitable and Shows Declining Revenue

InvestorPlace contributor Chris MacDonald called the Gates Foundation’s VRM stock investment a head-scratcher. Indeed, a 13-F filing isn’t going to reveal the reasons why the Gates Foundation chose to invest in Vroom.

The point is that individual investors need to form their own decisions about Vroom after checking out the company’s fundamentals. So, let’s look under the hood and see what Vroom’s second-quarter 2022 results reveal.

Distressingly, Vroom posted a $115.1 million net earnings loss in Q2. Vroom isn’t a profitable business. If adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is your preferred metric, then you’ll still probably be disappointed. That’s because Vroom reported an adjusted EBITDA loss of $85.6 million for the quarter.

Vroom’s top-line results were also dismal. In the year-earlier quarter, Vroom announced $761.9 million in total revenue. However, in Q2 2022, that number dwindled to $475.4 million.

What You Can Do Now

There’s no need to try to guess why the Gates Foundation took a stake in VRM stock. Instead, it’s sensible to do your own research and dive into Vroom’s financials yourself.

After doing that, you’ll undoubtedly discover Vroom’s major fiscal issues. Consequently, you can choose not to invest in Vroom regardless of what the Gates Foundation or any other organization does.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.