CryptoFundManager

VRM 35K calls block expiring soon! Extremely Bullish !!

Long
NASDAQ:VRM   Vroom, Inc
Yesterday i was amazed to see a block of 35K calls worth of $525K on VRM expiring May 20.
And i will explain to you why they might be extremely profitable!

Since its highs, VRM lost 97.76% of its value and it`s not a crypto, by the way, it`s a company that makes billions of dollars.

The calls are related to the first Quarter earnings on May 9, so they expire 11 days after the results.
What should we expect from the earnings?
- revenue growth! last quarter their Ecommerce revenue was $738.7 million, up 159% year over year; gross profit was also up a lot, 64% YoY!
- a strong financing business! On February 01, 2022, Vroom announced the successful completion of its acquisition of United Auto Credit Corporation (UACC), a proven leader in automotive finance for $300 Mil.

Soon after the news above was released, on 2/3/2022, Bank of America set a price target for VRM of $30.00
So how come it is trading at $1.62???

Well, 27.11% of the share float is Shorted!
Big institutional owners like Vanguard, Blackrock , Morgan Stanley , JPMorgan Chase have average entries at $40!
And many of them had recently averaged down their investment, like Goldman Sachs which reported on 2/17/2022 an increase of 104.5% in their ownership in VRM , respectively 1,753,977 shares worth $18.93Mil for a total of 1.281% of the company. Their average is now $22.55.
So if they are happy with a 22 average, how come we don`t we buy it at $1.62?

VRM has a Price to book ratio of 0.24 now.
A P/B ratio less than 1 means that the stock is trading at less than its book value, it`s way undervalued!
the Price to Sales ratio is only 0.07! By comparison, its rival, CVNA (Carvana), has a P/S of 1.16.
Based on Q4 Financials, If they liquidated the inventory, cash in on all receivables and pay off the
$600M senior note, each shareholder will receive approximatively $6.5 per share.

If we look at the daily timeframe , VRM formed a falling wedge pattern which is extremely bullish as you know, on an oversold area, 25 on the RSI .

Institutional ownership in VRM is high, 92.19%
52 Week Range 1.58 - 48.80
Market Cap of only $235.47Mil! Can be a buyout at this point!
2021 Revenue: $3.18Bil

All things considered, fundamental and technical analysis , i think that the 35K calls will be in the money, extremely profitable, by the time of expiration.

My short term price target for VRM is $5.5, i think it`s trading so low because it`s heavily shorted by the hedge funds, to have a better average on their entry.

Looking forward to read your opinion about it!






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