Cazoo (NYSE: CZOO) stock price was one of the top performers in Wall Street on Wednesday. The shares surged by more than 75%, its best day since going public a few years ago. It soared to a high of $10.75 in a high-volume environment.
Data by Yahoo Finance shows that over 13 million shares exchanged hands on Wednesday. This figure was substantially higher than its average of 444,450. Notably, there was no news that pushed the stock this higher.
Cazoo, popularly seen as UK’s Carvana, remains much underwater as its stock remains about 99% below its all-time high. Over the years, its market has crashed to just $51 million. Other similar companies like Vroom have also crashed hard in the past few years.
Cazoo Group stock price has jumped a few months after the company avoided bankruptcy by doing some debt restructuring. It did that by converting irs $630 million prncipal amount to convertible notes due 2027.
Recently, however, there have been reports that the company is eying new funds to escape insolvency. Most importantly, Cazoo Group announced that it was moving into a pure-play online automotive marketplace.
It hopes that its strong brand in the UK will help boost sales for its dealers. It aims that the millions of people who visit its website will turn into customers for its dealership customers.
Cazoo Group is not the only online marketplace that is struggling. In the US, Vroom, which was once a tech unicorn, is on life support, with its market valuation slipping to just $23 million. It has also changed its business model and is still burning cash at a fast pace.
The company started the year with $135 million in cash and expects to end 2024 with between $35 million and $65 million.
Carvana, the biggest player in the industry, has also been under pressure in the past few years. While its stock is up by more than 1,000% in the past 12 months, it remains sharply below its 2021 high of $361.
Therefore, since there have been no news about Cazoo, there is a likelihood that the ongoing pop is because of hype among day traders. A closer look shows that it was one of the top trending stocks in social media platforms like StockTwits and Reddit.
It is unclear whether these gains will hold in the long term because of the risks facing the company. I believe that it will retreat soon as the current momentum fades.
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