Carvana’s stock (CVNA) has more than doubled in price this year alone. There will likely be some profit taking in the weeks and months ahead, yet Carvana has solid upward momentum. The question is whether Carvana will continue to outperform the market as time progresses.
The masterminds behind Carvana have come up with some extremely creative ways to sell used vehicles. As a result, revenue has increased quite considerably. Carvana revenue skyrocketed nearly 140 percent this past quarter. The company’s nearly 120 percent year-over-year increase in vehicles sales is certainly worthy of investor respect. If you have not heard of Carvana or if you have only heard of the company in passing, you might not know about its vehicle “vending machines” that stand several stories high. These auto vending machines really do lower your selected ride to ground level, similar to how beverage vending machines operate yet on a much larger scale.
Carvana executives are insistent on expanding the business. The auto seller makes use of an array of unique practices including high tech advances in an attempt to pique consumer curiosity and steal market share from competitors. However, expansion comes at a cost that has the potential to keep Carvana’s stock in limbo. Carvana recently had its largest quarterly deficit in more than two years partially due to the push for rapid and far-reaching expansion. It appears as though Carvana’s scaling will work across posterity. The early numbers are a good sign: Carvana’s gross profit per unit has increased from about $1,742 to more than $2,300 this past year. Carvana executives are on record as stating the company is striving toward $3,000 gross profit per vehicle sold.
Of course, there have been some red flags. Carvana’s stock decreased 34 percent in October. The decline follows the stock’s all-time high. Unfortunately, nearly the entire stock market declined in the past month, bringing Carvana down with the rest of the crowd. Furthermore, it is sensible to believe some investors simply took a portion of their Carvana profit off the table after the market reached new heights earlier this year. The bottom line is Carvana’s downswing is not the fault of company executives. There was no err in business strategy or any other misstep that should have prompted the sell-off.
Carvana recently expanded its services to four more cities in the United States. Carvana empowers shoppers to select used vehicles online and have them transported to the aforementioned vehicle vending machine at a designated location. This novel approach to selling vehicles is proving quite successful. Carvana’s third quarter earnings results are impressive. The company’s sales are steadily increasing, hitting $535 on a year-over-year basis. The company’s expansion into new markets combined with its idiosyncratic approach to auto shopping have propelled gross profit up nearly 200 percent to just under $60 million. Carvana shares subsequently spiked 15 percent after these numbers were released. Though Carvana just barely missed its bottom line estimates, it exceeded top-line estimates and the stock bounced back quite nicely following the October slide.
The days of kicking the tires on a car at an auto dealership lot will probably never completely fade away until autonomous vehicles hit a mainstream tipping point. Take one look at Carvana’s incredible auto vending machines and business model and you will immediately be impressed. This company is a true industry trailblazer. Carvana is approaching its 20th consecutive quarter for triple digit growth on a year-over-year basis. It is quite intriguing to learn Carvana sold more vehicles to customers in the third quarter of 2018 than it did in all of 2016 and 2015 combined. Though Carvana might not steal a considerable portion of the overall market share, this company’s unique approach to selling vehicles is working quite well.
Look for Carvana to continue to thrive until autonomous vehicles line streets across the globe. It appears as though autonomous vehicles will not be accepted by the masses for upwards of another decade or longer. Buy Carvana, monitor industry advancements, time your exit prudently and you will make money on this unique company.
Regards,
Ethan Warrick
Editor
Wealth Authority
