Market Reaction - Motorpoint Group

Time Period: Financial year ended March 31 

- Pretax loss widened sharply to GBP10.4 million in FY 2024, compared to GBP300,000 in FY 2023. 

- Net cash as of March 31 rose 64% to GBP9.2 million from GBP5.6 million in the previous year. 

- Fall in annual revenue influenced by market headwinds, stock mix, and vehicle price deflation. 

- Retail volumes declined 8.2%, but retail sales recovered 8.9% in the final quarter of FY 2024. 

- CEO Mark Carpenter stated that the past financial year was the most difficult in the company's history. 

- Positive start to FY 2025, with profitable months in April and May.

- CEO Carpenter expressed confidence in the company's ability to scale profitability as the market improves. 

- The company aims to invest further in growth. 

- Revenue fell 25% to GBP1.09 billion in FY 2024, compared to GBP1.44 billion in FY 2023. 

Share Price: 138.86

Valuation Price: 25.5

Chart:

The company did see some falls recently on their share price. But considering the news they have been remarkably stable.

My previous valuation in November of 2023 summarised with:

"Motorpoint, which once displayed robust progress, now confronts multiple challenges in its growth trajectory. The post-lockdown revenue surge appears to be diminishing, influenced by shifting consumer demographics, the necessity to revalue stock due to Electric Vehicle (EV) price declines, mounting finance costs amid rising interest rates, and tightening consumer budgets. In particular, their once-advantageous position in the post-COVID era, catering to consumers seeking nearly-new vehicles, is compromised by an improving new car market and amplified financing costs.

However, there's room for optimism beyond 2024. As global economic conditions find equilibrium, it's probable that interest rates will decline, making Motorpoint's finance schemes more attractive. Furthermore, the economic downturn of 2022 and 2023 that deterred consumers from significant purchases, like nearly-new cars, is likely a temporary phase. As economic conditions improve, so should consumer confidence and, in turn, Motorpoint's sales. This resurgence might be compounded by potential acquisition interest. "

I think my initial points about multiple challenges are very relevant. Its very surprising to see the company at such a high valuation especially with negative news.