Hard to believe it’s been almost a year since ACV Auctions leaders converged on Manhattan to celebrate their initial public offering on the NASDAQ stock exchange.
The Buffalo-based firm (NASDAQ: ACVA) debuted on the NASDAQ at $25 per share and ultimately raised $414 million in a successful IPO.
The story since that time has been mixed. In a turbulent time for the used vehicle market, ACV has posted strong growth figures in each of its quarterly updates since its IPO.
But its share prices have sagged amid concerns over the company’s margins and a broader lull in the tech sector. ACV shares once surpassed $36 in April 2021 but are now hovering at $10.50.
ACV offers a digital platform for used car dealers to sell their cars to one another. The company posts its fourth-quarter and full-year results Wednesday.
As always, it will be a closely watched event in Buffalo, where many individuals still hold shares from when they were private investors.
What to look for? ACV Auctions has been seeking diversity in its product and service mix, building out teams for new technology tools that serve it customers.
But it looks like business fundamentals will be a theme in the foreseeable future.
ACV foreshadowed this dynamic in a January news release.
Management will “discuss the company’s strong fourth-quarter financial results that are expected to exceed the high-end of the revenue guidance range provided on November 10, 2021, and a lower-than-expected adjusted EBITDA loss.”
The paragraph is instructive, as it takes aim both at the basic pillars of any stock analysis: revenue growth and profit margins.
In November, the company said its third-quarter revenue was $91.8 million, a 36% year-over-year increase. But in the second quarter, its revenue was $97.4 million, a 117% increase. In a growth-minded tech company, Wall Street analysts want to see those percentages going up, not down.
ACV previously said it expected fourth quarter losses (adjusted for EBITDA) to come in at $22 to $26 million, and full-year losses (again adjusted for EBITDA) in the $51-$54 range.
Losses have always been part of ACV’s business premise, as it spends money to establish operations in new territories. They are simply the upfront cost of doing business in a company that is in some ways creating a new market.
But ACV’s own statements acknowledge what investors are looking for: maintaining growth while working its way toward a profitable business will go a long way toward beginning to recover its stock price.
