Carvana Stock Fair Value Calculation – CarMax Stock Rises on Earnings Beat, Carvana Sinks in Contrast.
June 30, 2023
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CarMax’s stock rose significantly on Tuesday following strong earnings that exceeded expectations, while Carvana ($NYSE:CVNA), the online competitor of CarMax, experienced a slump in their stock. The company attributed this to increased investment in e-commerce platforms and other infrastructure projects. Carvana is an online auto retailer based in Phoenix, Arizona that specializes in selling used and certified pre-owned vehicles. The company is known for its innovative car-buying model that includes home delivery and allows customers to shop for cars, finance them, and trade them in online.
Earnings
In its latest earning report of FY2023 Q1 as of March 31 2021, CARVANA reported total revenue of 2245.0M USD and a net loss of 36.0M USD. This marks a 35.8% decrease in total revenue compared to the same period last year. Over the past 3 years, CARVANA has seen its total revenue increase from 2245.0M USD to 2606.0M USD.
In contrast, CarMax posted rising stock prices due to its earnings beat from the same period. This marks the highest ever quarterly revenue for CarMax, showing a robust performance in this quarter.
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Carvana. More…
| Total Revenues | Net Income | Net Margin |
| 12.71k | -1.49k | -5.0% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Carvana. More…
| Operations | Investing | Financing |
| -797 | -2.39k | 3.34k |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Carvana. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 8.65k | 9.97k | -6.22 |
Key Ratios Snapshot
Some of the financial key ratios for Carvana are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 43.7% | – | -16.5% |
| FCF Margin | ROE | ROA |
| -8.8% | 222.2% | -15.1% |
Market Price
This came in stark contrast to Carvana Co. (CVNA), whose stock opened at $21.6 and closed at $20.9, down by 2.3% from its previous closing price of 21.4. Investors were largely unimpressed with Carvana’s quarterly results, which failed to meet market expectations. The decline in CVNA stock marks a notable shift in sentiment for the company, which had been riding high on the back of strong growth in the online vehicle buying and selling space. Carvana’s revenue and earnings growth for the quarter was below expectations, which likely contributed to investors’ disappointment.
This is despite the fact that Carvana’s customer base grew significantly during the period. While CarMax stock benefited from stronger-than-anticipated earnings, Carvana failed to live up to investor expectations. Going forward, it remains to be seen how Carvana will adjust its strategy and improve its performance in order to regain investor confidence. Live Quote…
Analysis – Carvana Stock Fair Value Calculation
At GoodWhale, we analyzed CARVANA’s fundamentals to determine the fair value of its stock. We use our proprietary Valuation Line to calculate the value, which gives us an estimated fair value of $170.6 per share. That’s a huge difference from where the stock is currently trading at, which is $20.9. This implies that CARVANA is currently undervalued by 87.7%. Carvana_Sinks_in_Contrast.”>More…
Peers
There is fierce competition between Carvana Co and its competitors Vroom Inc, Shift Technologies Inc, and CarMax Inc. All four companies are vying for a share of the online car buying and selling market. Carvana Co has the advantage of being the first mover in the online space and has established a strong brand presence. However, its competitors are not far behind and are quickly catching up. All four companies are investing heavily in marketing and technology to gain an edge over the others. It is likely that the competition between them will intensify in the coming years.
– Vroom Inc ($NASDAQ:VRM)
Vroom Inc is an online used car retailer headquartered in New York City. The company was founded in 2009, and has since grown to become one of the largest online used car retailers in the United States. Vroom offers a wide selection of used cars, trucks, and SUVs, and provides financing, warranty, and delivery options to customers nationwide.
Despite its impressive growth, Vroom has not been profitable, and its Return on Equity (ROE) is negative 112.63%. This is due in part to the high costs associated with acquiring and selling used cars, as well as the need to heavily invest in marketing and customer acquisition.
Vroom’s market cap is 147.78M as of 2022. While this is a sizable number, it is dwarfed by the market caps of some of the largest automakers and retailers in the world. This indicates that there is still room for Vroom to grow, and that investors believe in the company’s long-term prospects.
– Shift Technologies Inc ($NASDAQ:SFT)
Founded in 2013, Shift Technologies Inc is a technology company that provides an online platform for buying and selling used cars. The company has a market cap of $45.76M and a return on equity of 6532.78%. Shift’s platform offers a convenient, transparent and efficient way for customers to buy and sell used cars. The company operates in the United States and Canada.
– CarMax Inc ($NYSE:KMX)
CarMax is the largest retailer of used cars in the United States. The company was founded in 1993 and is headquartered in Richmond, Virginia. CarMax operates over 200 used car dealerships across the country. The company offers a wide variety of makes and models of used cars, trucks, and SUVs. CarMax also offers financing and extended warranties on its vehicles.
CarMax has a market cap of $9.59 billion as of 2022 and a return on equity of 16.04%. The company is a publicly traded company on the New York Stock Exchange (NYSE: KMX). CarMax has been a consistently profitable company since it was founded. The company has grown its revenue and earnings at a double-digit pace over the last decade. CarMax is a well-run company with a strong competitive position in the used car market.
Summary
Carvana, a rapidly growing online vehicle retailer, experienced a sharp decline in its stock price after its recent earnings report. Despite beating analyst expectations, the company posted a larger than expected loss due to higher operating expenses. Furthermore, its outlook for the coming fiscal year was less optimistic than the market expected.
Investors have become increasingly concerned about the company’s ability to maintain its growth as competition intensifies from larger rival CarMax. Moving forward, investors should closely monitor Carvana’s progress in building its e-commerce platform and expanding its physical presence in order to gauge whether it can keep up with CarMax in the long run.
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