Cazoo Group Ltd (NYSE:CZOO) has been downgraded by Citigroup as the car retailer focuses on cash preservation over growth.
The company said overnight that it will cut 15% of its workforce, including around 750 jobs in the UK and Europe, and reduce its marketing spend to save more than £200mln in an effort to protect profits as the car market cools.
Citi moved to a ''neutral/high risk' rating with a target price of $1.5 as it cut its revenue forecasts between 28% and 48% for this and next year and gross profit by around 75%.
"We don't think the market is surprised by the cut to guidance given how ambitious previous guidance looked, and we think the pivot is sensible with capital markets harder to access," Citi's analysts said.
"We expect adjusted EBITDA losses and cash burn to remain relatively high for the next couple of years (even as unit economics improve) and factor in an additional cash raise in 2024."