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BREAKING news! Carvana & Vroom is bleeding cash. Is Ecommerce in auto DOA?

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#102
They mentioned a new recon center outside of Indianapolis, that's got to be the recently former Vroom center right? It's been impressive to watch this company over the last couple years. Out of all the numbers and really good detail in these letters to shareholders, there is one common theme I like to bring up internally. That theme being that everything they do is secondary to providing an "unparalleled customer experience." I love that. Can't wait to see their site redesigns later this year.
 
#103
JamieS said:
They mentioned a new recon center outside of Indianapolis, that's got to be the recently former Vroom center right? It's been impressive to watch this company over the last couple years. Out of all the numbers and really good detail in these letters to shareholders, there is one common theme I like to bring up internally. That theme being that everything they do is secondary to providing an "unparalleled customer experience." I love that. Can't wait to see their site redesigns later this year.
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Seems like the timing and locations are coincidental, the Vroom facility was in Whitestone and the Carvana IC is in Mount Comfort. The Carvana location was supposed to have been a HQ for an Indy based logistics company.
 
#106
Cullen C said:
Yep, 2k qrtly GPU is pretty impressive.
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This is no small feat. Imagine your multi-roof org was tasked with raising Gross Profit p/Unit in the used car dept by 30% AND not killing sales volume as a consequence. Imagine how long that would take to roll out. Think about how each store would swing results wildly.

I see Carvana in a new light now. Their rapid improvement shows Carvana's leadership has a firm grip on its processes AND this rapid improvement demonstrates how the simplicity of its business model allows it to rapidly adjust as needed when needed.

sidebar: vAuto & @DalePollak are you listening? Your thoughts?
 
#107
joe.pistell said:
I see Carvana in a new light now. Their rapid improvement shows Carvana's leadership has a firm grip on its processes AND this rapid improvement demonstrates how the simplicity of its business model allows it to rapidly adjust as needed when needed.
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Agreed, except for the "new light" part. Their model is very efficient and they are "car guys" (unlike Beepi and other failures), but time will show (as the math catches up with them) that there aren't that many inefficiencies to solve for that dealers cannot also solve for when it comes to used cars.

If Carvana had debuted before vAuto created so many efficiencies in used car acquisition and pricing, they would have a better chance at proving they're a $7.6 billion company. I stand by the math that shows they're worth every bit of $2 billion. As their Q2 financials show, they lost $103.9 million so far in 2018 versus a loss of $77.3 million during the same period last year... and they missed expectations on their loss per share.

Carvana sold $172 million worth of additional shares this year, so their cash position looks better than it likely is. (Selling additional share dilutes the value of existing shares.) But, Wall Street didn't care about that and will likely continue to let them offer new shares without the usual penalty of lower per share prices.

(There's also an interesting entry on their cash flow statement that looks like they may be factoring their receivables: "Proceeds from sale of finance receivables" to the tune of over half a billion dollars. If that's what this is, then their cash position would scare the crap out of me if I was holding the stock.)

Yes, the improvements in gross margin per unit are commendable, but they're not unexpected or even revolutionary. At $2,200 per copy they're still below the industry average (according to NADA data). This means they can and will continue to improve, but to what level? A level where they become profitable enough to justify $7.6 billion? Doubtful.

To say they are "the Amazon of Car Dealers" means people don't understand the car business. Yes, Amazon lost money initially too, but Amazon will never hit the inventory sourcing problem that will ultimately catch up to Carvana. There is no manufacturer of used cars Carvana can squeeze they way Amazon can squeeze their providers.

Carvana, to be clear, is not even CarMax. Carvana must - for the rest of their existence - spend heavily to attract customers and vehicles. Without the physical locations that CarMax enjoys on "auto row," Carvana has to keep reminding car buyers that they're here and ready to help.

Traditional new car dealers also have advantages that Carvana cannot overcome IMO: Their database of customers; their service business; their access to late-model trades (when selling a new car); and their access to closed auctions.

(To be 100% transparent, I've purchased Carvana stock when it dips and sold it when it peaks a little; I've also shorted the stock - and made good money doing both. I added a new short position right before the latest earnings in hopes Wall Street would understand math, but got squeezed a bit. My short positions don't expire until after their next earning report, so I'm feeling confident I will recover on these. Moreover, I'll likely be adding to these next week - if the stock continues to hover in the mid 50's.)
 
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