Hybrid automobile e-commerce and facilities-based platform LMPX Automotive Holding Inc. (NASDAQ: LMPX)
stock has been volatile since its IPO debut in December 2019. After peaking at $49.30, shares fell victim to the pandemic plunge with the benchmark S&P 500 index (NYSEARCA: SPY)
. LMPX shares collapsed to a low of $3.33 before recovering in late March. The Company is an early-stage hybrid automobile distribution business that is currently acquiring dealerships to build up inventory for its subscription model that is a cross between a Carvana (NASDAQ: CVNA)
, CarMax (NYSE: KMX)
and Avis Budget Group (NYSE: CAR)
. As the restarts continue to accelerate, demand for new and used cars continue to improve. Risk-tolerant investors seeking exposure into a hybrid model can consider gaining some exposure at opportunistic pullback levels.
Q2 FY 2020 Earnings Release
On Aug. 14, 2020, LMPX released its fiscal second-quarter 2020 results for the quarter ending June 2020. The Company reported an adjusted earnings-per-share (EPS) profit of $0.02 excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.10), beating estimates by $0.08. Revenues grew by 44% (sequentially from Q1 2020) to $7.7 million beating analyst estimates by $1.98 million. The Company ended the quarter with $17.7 million in cash and $11 million in auto inventory. The Company CEO of LMP Automotive, Sam Tawfik, summed up the quarter, “We are seeing robust acquisition market as we continue to build our pipeline of prospective dealership acquisition and intend accelerating our acquisition strategy moving forward… as we roll-out e-commerce home delivery, site-to-store, and ship-to-store and ship-from-store delivery strategies… at the growing list of auto dealerships we intend to acquire.” The Company identified a significant sales rebound that triggered in April 2020 and continue to strengthen through August 2020.
The Hybrid Model
The Company launched its next-gen e-commerce app and website in September 2020. LMPX operates a hybrid model rather than pure e-commerce like Carvana or a traditional dealership. A pure e-commerce model has no real path to profitability according to Tawfik. The Company acquires dealerships to add income and shareholder value and enables the e-commerce to add momentum. The e-commerce generates top and bottom-line growth, which grows the same-store sales growth. To alleviate delivery costs, the Company seeks to acquire dealerships clustered within a 200-mile radius of distribution points. The subscription program enables customers to find and rent a car for a minimum of 30-days.
Atlantic Automotive Group Acquisition
On Oct. 12, 2020, LMPX announced an agreement for the acquisition of a 70% stake in Atlantic Automotive Group and Atlantic Central Store for $608 million. This boosts total contracted new vehicle franchises to 33 after the completion of acquisition and over 9,000 vehicles. The Company continues to lever up its assets and plans more accretive dealership acquisitions during this growth start-up stage. There are around 9 million shares in the float so volume and liquidity can be thin. Risk-tolerant investors can watch for opportunistic pullbacks to gain exposure or trade the volatility.
LMPX Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a more precise view of the landscape for LMPX stock. The weekly rifle chart completed a full stochastic oscillation that peaked near the 100-band and slipped back under the 80-band. The stock fell through the weekly 5-period moving average (MA) near the $29.46 Fibonacci (fib) level. This can set-up a channel tightening sell-off towards the weekly 15-period MA at the $19.26 fib. The weekly rifle chart formed a weekly market structure low (MSL) above $7.85 in August and now risks triggering a market structure high (MSH) sell trigger on a breakdown through $22.80. The daily rifle chart triggered its MSH when $36.20 broke down as the stochastic makes a full oscillation down through the 20-band. A daily MSL buy trigger forms on a breakout through $28.91. While the daily and weekly stochastic are both down a weekly MSH trigger may present opportunistic pullback levels at the $22.81 fib for nimble traders to scalp, $19.26 weekly 15-period MA/daily lower Bollinger Bands/fib, $17.49 fib and the $15.44 fib. This stock is primarily for nimble traders that can react at the key fib levels and can manage the action of a thinner trading stock since the float is small at under 10 million shares. Stops are very critical as well as proper share allocation adjusted to holding period.
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