The market does not seem to be pricing in a very good future for this stock.

Since the firm is not yet profitable or cash-generative, that’s the only sensible valuation metric that we have for the time being. This company is trading quite cheaply on a sales basis, at a whopping 98% discount to the consumer discretionary sector. The proof of whether this will work or not has not yet materialized. Overall these numbers speak to a company that is streamlining itself in response to evidently lower sales volumes this is in line with what management has stated in its most recent filing. I will be paying attention to this number in particular to see how the firm evolves in response to current conditions. This can be considered the sole bright spot of what was otherwise a difficult quarterly report for Q3 2022. Yet, Shift also appears to be able to generate some cash from its operations. Interestingly the firm actually retired $52.4M of debt in the most recent period, but it still issued $68.4M of new debt it is simply rolling over its liabilities. Overall operating expenses still ended up higher than they had been at any point during 2022.Īs the company has been losing money on its operations, it is no surprise that it has seen a dwindling cash balance.Īs such it has had to issue debt to continue operating, consistently receiving cash from financing since Q3 2020. In light of the revenue decline this was not enough to move the needle. Management appears to have cut costs significantly in the last quarter, however, and total OpEx decreased 13.8% ($61.2M to $52.7M). Simply put, there doesn’t appear to be enough gross margin for it to get to a positive bottom line. Furthermore Shift was not able to generate a positive operating income even when it was working with higher used car prices this figure has grown significantly worse over the last year as well.Īs it now stands the company is losing roughly 30 cents on every dollar of revenue that it generates.

The low and declining gross margin here doesn’t leave much room for the company to actually generate a profit, as seen above. This has resulted in a much tighter gross margin for Shift over the last year, with the firm having to spend over 90 cents per dollar of revenue on a gross basis. As expected the firms gross margin is tightly correlated to used car prices, which peaked in Q1 2022 and have been declining since. Nonetheless gross margin has not been particularly high. Throughout this period the company has been squeaking out a thin gross profit, notably keeping this number positive in the wake of recent difficulties within its operating market. While posting significant growth for most of the last 10 quarters, Shift saw its most recent quarterly revenue number decline to a level last seen in Q2 of 2021. Indeed, the firm has posted what appears to be an accelerating net loss, with the latest quarter being the largest loss yet seen.Īgainst this backdrop we can see that revenues have also been quite volatile. Financialsįirst off, we must note that Shift Technologies is a growth company that is not yet profitable. This article will review the company’s financials and present valuation in order to determine if this is the case. While the used auto market has indeed faced significant turmoil over the last year, this stock is certainly sold off and may present an opportunity. As of this article, its shares are trading at $1.53. Having been a penny stock, the firm had to reverse split its shares in order to maintain listing requirements on the NASDAQ (at least $1 share price to stay listed). Note the numbers in the chart reflect its recent 10-1 reverse stock split while it traded in the $10-$11 range during its public debut, this number shows up as $100 given the mathematics around the reverse split.

Shift Technologies has depreciated significantly since entering the public markets, underperforming the S&P500 Index roughly 3-to-1. This keeps the balance sheet of the firm much lighter and as such can be considered more of an auto retailing ‘pure play’ without the financing component. Instead, Shift offers auto loans through its lender network. The company’s business model is similar to Carvana’s although different in one important aspect: it does not provide direct to consumer financing. Founded in 2013, the company has grown throughout the previous decade and first entered the public markets via SPAC merger in Q4 2020. Shift Technologies ( NASDAQ: SFT) is an online car retailer akin to Carvana. Simon2579/iStock via Getty Images Overview

Shift technologies inc