Carvana: Terrific Execution, But Trading At Risky Levels

Gary Alexander
30.6K Followers
(8min)

Summary

  • Carvana has shown significant growth and profitability, with a 2x appreciation in stock price year to date.
  • Q1 unit sales grew 21% sequentially and 16% y/y, even despite broader macro headwinds that have consumers delaying big-ticket purchases.
  • Carvana believes it has the infrastructure in place to achieve 3x greater scale, allowing for significant expansion in adjusted EBITDA margins.
  • Despite these strengths, the stock already trades at meaty multiples of adjusted EBITDA that doesn't leave much room for upside.

Carvana used car vending machine. Carvana is an online only preowned and used car dealership VI

jetcityimage

One of the biggest turnaround rallies we've seen this year is Carvana (NYSE:CVNA). After spending more than a year in the penalty box for slower car sales and massive holes in profitability, the used car e-commerce platform, the largest

This article was written by

30.6K Followers
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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