On Friday, B.Riley adjusted its stance on RumbleOn, Inc. (NASDAQ:RMBL), downgrading the stock from Buy to Neutral. The firm set a price target of $7.00 for RumbleOn shares.
According to InvestingPro data, the stock has shown significant volatility with a beta of 2.09, and currently trades with a market capitalization of $247.6 million. This change in rating comes as the stock experienced a significant rise, approximately 70%, since the company reported its third-quarter results for 2024 and announced an equity rights offering.
InvestingPro analysis indicates the stock has delivered impressive returns of 25.9% over the past six months, despite analysts anticipating sales decline in the current year. In contrast, the Russell 2000 Index (R2K), a small-cap stock market index, saw only about a 1% gain during the same period.
The analyst from B.Riley cited the stock's performance, which culminated in it closing at the firm's recently-lowered price target of $7.00, as a reason for the downgrade. Based on InvestingPro's Fair Value analysis, the stock appears fairly valued at current levels.
Additionally, the firm expressed reservations about the timeline for a recovery in powersports demand, which is necessary to extend their outlook beyond their 2025 estimates or to increase their target multiple for the stock. InvestingPro data shows the company faces profitability challenges, with a negative return on assets of -20.18% over the last twelve months.
The decision to downgrade RumbleOn is said to be in line with a similar move made earlier in the week when B.Riley downgraded Brunswick Corp . (NYSE:NYSE:BC) to Neutral with an $88 price target. The firm's concerns regarding the potential demand recovery timeline for the recreational marine industry influenced both downgrades.
B.Riley indicated that it would consider becoming positive on RumbleOn shares again if there were clearer signs of improved powersports demand or a more attractive entry point into the market. The firm's approach remains cautious until such indicators become evident.
In other recent news, RumbleOn reported a decrease in Q3 earnings for 2024, with a 12.7% fall in revenue to $295 million and a 26.1% decline in adjusted EBITDA to $6.8 million. Despite these reductions, the company achieved a 53.8% reduction in total inventory and secured a $30 million capital commitment from major shareholders for debt repayment and refinancing.
In a significant strategic move, RumbleOn launched a $10 million equity rights offering, aimed at fulfilling part of the company's additional capital financing requirements. The company also entered into an exclusive partnership with popular streamer Dr Disrespect, tying the equity deal to performance milestones and including the creation of exclusive content for Rumble's Premium platform.
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