What happened
Shares of online used car company Cazoo Group (CZOO 6.39%) traded nearly 10% higher as of 10:22 a.m. ET Monday for no obvious reason. A big institutional investor piled into the stock last week.
So what
Now a penny stock, Cazoo has been hammered this year, with the stock down more than 91%. Over the last week alone, shares are down more than 15%.
But recently, the company announced the results of a strategic review in which it is planning to wind down its operations in the European Union. The move will enable the company to save roughly 100 million pounds by the end of 2023, which Cazoo believes can hasten its path to profitability. In these difficult market conditions, investors are less interested in growth and more focused on profitability.
One big investor seems to like this plan. Billionaire Andreas Halvorsen, who manages the Viking Global Investors hedge fund, recently purchased 60 million shares of Cazoo, which gives Viking Global a 7.3% stake in the company.
Now what
For the six months ending in June, Cazoo reported a loss of 243 million pounds and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of 175 million pounds -- and margins aren't good either. It's clear the company has a lot of work to do.
But Cazoo now trades at less than a $400 million market cap and is projected to make $1.57 billion of revenue this year, so there could be some upside from here if the company can effectively streamline its operations.
