Carvana

Stock: CVNA

Rating: Buy

Author: Waleed M. Tariq

Overview

  • Carvana Co. buys used cars and provides a convenient car-buying experience.
  • Its segments are Vehicle Sales, Wholesale Vehicle Sales, and Other Sales & Revenue.
  • Wholesale Car Sales include wholesalers. Other Sales and Revenue includes vehicle loan receivable sales.

Bullish

  • CVNA has seen 7 years of great revenue growth, and 2021 will be even better due to a semiconductor shortage.
  • First-mover advantage has helped the company achieve positive EBITDA margins.
  • The corporation has few assets and a small footprint, meaning low capital expenditures.

Bearish

  • CVNA competes with CarMax. Long-term, I expect the stock to be under pressure and uninteresting.

Effortless buying

  • CVNA’s entire purchasing process is online and mobile. This covers browsing, delivery, warranties, and financing.

Asset Light

  • CVNA’s asset-light model helps it compete with brick-and-mortar businesses. CVNA’s hub-and-spoke model reduces its physical footprint.

Multi-Year Head start

  • Carvana’s business model provides them a leg up in the online used car retailing market. This boosts growth.

Financeability

  • CVNA has online credit. CVNA’s lending dashboard offers over 10000 APR, down payment, installment, and term length possibilities.

Conclusion

  • CVNA is a star in the internet used car industry, but it’s playing catch-up to CarMax, whose physical footprint can only be strengthened by its digital one.