Cazoo share price has collapsed and become a penny stock as challenges in the auto sector remains. The CZOO stock price plunged to an all-time low of $0.27, which was more than 98% below its all-time high. Its market cap has plunged to just $271 million. This price action is similar to that of other similar companies like Carvana and Vroom.
Is Cazoo a good stock to buy?
Cazoo is a company that is at the intersection of technology and the automobile sector. The firm makes it possible for people to buy cars through its website and mobile applications. It has operations in the UK and several other countries.
In October, the company delivered relatively strong financial results. Cazoo’s UK revenues jumped by 103% year-on-year to 347 million pounds. The number of units sold jumped by 100% to 18,889 while the GPU jumped to 488 pounds. It ended the quarter with a strong balance sheet of over 450 million pounds in cash and inventories.
The company also announced plans to scale down its European expansion by selling its Italian business to Aramis Group. Investors believe that selling some of its overseas businesses will help it raise the cash it needs while becoming significantly lean.
A key challenge for Cazoo and companies in the industry is that auto sales are falling while losses are jumping. In the most recent quarter, the company said that its operational losses more than tripled from 103 million to 329 million pounds. These losses continued even as the country laid off thousands of staff.
Another challenge is that Cazoo could be delisted since its stock has remained below $1 since August. NYSE regulations state that a company’s share price must remain above $1 for 30 consecutive days.
A key potential catalyst is that its CEO is buying the stock. A disclosure this week showed that Alex Chesterman increased his stake to 186,496,856 shares up from the previous 178,369,874. As I wrote on Tuesday, Carvana’s collapse came after the founder and CEO spent years dumping the stock.
Cazoo share price forecast
The four-hour chart shows that the Cazoo stock price has been in a strong bearish trend in the past few months. It moved below the important support level at $0.4552, which was the lowest level on July 26. It has moved to the oversold level, according to the Stochastic Oscillator.
Therefore, while the outlook is still bearish, there is a likelihood that the stock will have a brief rebound in the near term. If this happens, the next key level to watch will be at $0.40.
