Mar 10, 2021
general Analysis
[4 min Read]
Summary
I would recommend taking a quick look at their investor presentation: They outline the market opportunity, growth, and strategic direction very clearly. I did not want to include the images in this post so the link is provided below
Company Overview
Here is the summary of how Carvana operates - the key takeaway points are highlighted.
Founded in 2012 and based in Phoenix, Carvana's (NYSE: CVNA) mission is to change the way people buy cars. By removing the traditional dealership infrastructure and replacing it with technology and exceptional customer service, Carvana offers consumers an intuitive and convenient online car buying and financing platform. Carvana.com enables consumers to quickly and easily shop more than 20,000 vehicles, finance, trade-in or sell their current vehicle to Carvana, sign contracts, and schedule as-soon-as-next-day delivery or pickup at one of Carvana's patented, automated Car Vending Machines.
June 6, 2019 - McKinsey Report Used cars, new platforms: Accelerating sales in a digitally disrupted market
I realize this is report is a bit dated, but I believe the underlying information and trends still hold true.
“As revealed by our proprietary customer research, online providers are beginning to dilute traditional used-car dealers' positions and drive growth by empowering digitally savvy customers via three major capabilities:”
“We estimate that the number of used vehicles three years old or less will increase from 51 percent of the total in 2017 to about 60 percent in 2022”
Carvana is addressing these 3 key capabilities customers are looking for.
Feb 25, 2021 Recent Results
Summary from their 2020 Year End Earning Report. The growth results are significant in terms of units sold and revenue
https://investors.carvana.com/news-releases/2021/02-25-2021-210520761
Financial Metrics
|
CVNA |
Industry |
Price/Book (MRQ) |
55.92 |
7.83 |
Net Profit Margin (TTM) |
-3.06% |
1.75% |
Return on Equity (TTM) |
-19.95% |
8.85% |
Debt to Equity (MRQ) |
2.02 |
40.65 |
The Price to Book does not paint Carvana in a great light. For example, Amazon's PB ratio is about 16. This does not consider future earning for Carvana, which is the main play here. Carvana has a low D/E ratio compared to the industry
Institutional Ownership
There are some big-name institutions that are holding significant shares of Carvana. Breakdown in the table below and is pulled from Yahoo Finance.
Holder |
Shares |
% Out |
Value |
Price (T.Rowe) Associates Inc |
8,607,674 |
10.99% |
2,061,882,229 |
FMR, LLC |
6,987,935 |
8.92% |
1,673,889,949 |
Morgan Stanley |
6,700,363 |
8.55% |
1,605,004,953 |
Tiger Global Management, LLC |
6,012,907 |
7.68% |
1,440,331,742 |
Vanguard Group, Inc. (The) |
5,897,408 |
7.53% |
1,412,665,112 |
Baillie Gifford and Company |
5,806,161 |
7.41% |
1,390,807,805 |
Spruce House Investment Management LLC |
3,963,463 |
5.06% |
949,407,927 |
Blackrock Inc. |
3,432,778 |
4.38% |
822,287,642 |
D1 Capital Partners, LP |
3,364,985 |
4.30% |
806,048,506 |
CAS Investment Partners, LLC |
3,205,028 |
4.09% |
767,732,407 |
Management Team
A solid group with mixed backgrounds from both the automotive industry and technology industry. Refer to the their recent investor presentation
Potential Risks
Final Thoughts
The underlying financials indicate a company focused on growth, then profitability. Because their strategy is to capture significant market share of a fragmented market we will likely see the payoff in the next year or 2.