Carvana Co. (NYSE: CVNA), the online used car retailer based in Phoenix, Arizona and founded by the Garcia family (who also co-founded DriveTime Automotive), is making waves in the stock market. The firm’s shares have seen a significant upward trend of late, gaining the attention of investors worldwide. The question is, is now the ideal time to make your move and buy Carvana stock?
CARVANA’S BUSINESS MODEL
Founded in 2012, Carvana’s business model is drawn from the increasing demand for online shopping in the automotive industry. The firms operate as an online-only used car dealer, allowing customers to trade, finance, and sell vehicles through their website. By eliminating the traditional brick-and-mortar stores, Carvana reduces overhead and offers lower prices, passed directly to customers.
The company’s digital tool, the Car Vending Machine, adds an innovative and convenient touch. Instead of visiting a tangible location, the tool allows customers to pick up their purchased cars in one of several cities. The company even provides a one-year, worry-free guarantee to further win customer trust, hence, supporting the overall buying experience.
CARVANA STOCK PERFORMANCE
Carvana has been attracting the interest of investors thanks to its promising stock performance, as its shares have seen a significant increase over the last few months. Since November 2020, Carvana’s shares have soared from about $215 to the recent high of over $320, indicating a growth of almost 50%.
The company’s fourth-quarter financial results for 2020 revealed that it sold over 96,000 vehicles, an increase of 40% compared to the previous year. Their revenues also totaled over $1.8 billion, demonstrating an increase of about 65% when compared to the fourth quarter of 2019.
Carvana’s earnings report shows a negative EPS (Earning Per Share) value, but it’s important to note that this isn’t indicative of a company’s future profitability. Rather, the company’s continuous annual sales growth since 2017 reflects a positive trend.
THE IMPACT OF COVID-19 ON CARVANA
Although the pandemic has negatively impacted a multitude of businesses, Carvana has managed to turn the challenges into opportunities. The shift toward online shopping in the automotive industry, accelerated by COVID-19, has boosted Caravana’s growth.
Even during the height of the pandemic, Carvana managed to maintain its shipping operations because of its unique business model that inherently needed less human interaction. The firm quickly adapted to the new norm, leveraged digital means, and secured the opportunities to grow its customer base.
IS NOW THE TIME TO BUY CARVANA STOCK?
Purchasing Carvana’s stock is potentially a viable investment given the company’s robust growth and the shift in consumer behavior towards online shopping. Though it’s crucial to understand that investing in stocks always carries some degree of risk.
However, two prime indicators inspire confidence in Carvana’s future – its continued quarterly revenue growth and the expectancy surrounding the post-COVID situation. As vaccinations increase and economies open, a surge in buying behavior is expected, which could potentially drive the demand for cars and, consequently, Carvana’s stock.
Hence, it seems that the time might be ripe for a judicious and calculated investment in Carvana stock. Be sure to stay informed and make your investment decision based on comprehensive research and your personal financial situation.
INVESTOR TAKEAWAY
In summary, Carvana’s unique business model, increasing share prices, and the growth potential steered by the online shopping trend all indeed make it an attractive investment option. It’s essential, however, to understand that considerable fluctuations in the stock market are always a possibility, and making an informed decision is key. So, weigh your options carefully and seek professional advice before investing in Carvana or any other stock.