There’s a dark horse stock in a corner of the automotive tech industry that some investors might not be paying attention to.
Carv People are getting back to the business of upgrading their transportation after coronavirus closures impacted their finances. Carvana wants to be the “vehicle” for these sales.
“Auto sales in North America have continued to recover from the COVID-19 pandemic, since hitting a bottom in April,” writes a Reuters reporter by way of explanation. “A rebound in sales has seen major automakers scramble to ramp up production and boost inventories at dealerships.”
Looking at economic activity in the months since the federal government sent out individual checks and boosted unemployment income to cover the average citizen, we’re seeing this pickup in used auto sales, and with masks now de rigueur at dealerships, Carvana seems to be a more attractive option for many buyers.
As for its stock, the firm doubled its equity value this year, and historic charts show it actually doubled its value in 2019 and 2018, too.
Founded in 2013, Carvana now the third largest national retailer, but that doesn’t necessarily mean that it has a particularly large market share.
Specifically, the 100 top retailers in this segment only hold about 7% of total market share, partly because so many independent dealers operate in local markets all over the country.
Carvana’s market share is .4% nationally and 1.9% in its home base of Atlanta.
Some analysts believe that, based on the company’s unique strategy, there’s much more room to grow.
“It’s true that Carvana is highly unlikely to expand into, say, yard equipment,” writes Motley Fool’s Taylor Carmichael in a piece called Is Carvana the Amazon of Cars?. “The company will probably stick to automobiles. But Carvana does not need to expand into Amazon’s turf to survive and thrive. The market for books is fairly tiny; in 2017, it was $26 billion in the U.S. The automobile market is beyond big: $1.2 trillion in the U.S. alone. Buying and selling cars represents 21% of the entire U.S. retail landscape. So, yes Carvana is a retailer (just like Amazon), and it is using technology and the internet to destabilize existing markets (just like Amazon).”
Do people want to buy their cars online as they recover from coronavirus scares?
That’s likely, as many traders are looking at whether to get into Carvana just now. Take a look.