Should have opened this earlier and @jaska1 has been pushing so much that we’re getting it started 
So Carvana (Ticker CVNA) is a US company that sells 100% used cars online. I myself have been on board with Carvana as a shareholder for quite some time and have followed the company’s development through that.
What, in my opinion, makes Carvana an interesting investment target?
-They are disrupting the huge used car market, which is extremely fragmented
-Used cars are sold for almost 900 billion annually in the United States, and the largest seller’s market share (October 2020 data) was only a few percent!
-Most car sales are done traditionally in physical dealerships, but online purchasing is growing at a significant pace
-Carvana’s vision is to revolutionize this rigid structure and become the leading car dealer of the digital age, built purely on the terms of the digital world
-Carvana offers a unique buying experience where you buy online, and Carvana delivers your car to your doorstep within a week at the latest. In the meantime, the car has been inspected and examined at Carvana’s own vehicle inspection center. The buyer has a free return policy for the purchase.
-In the United States, car dealerships do not have a very good reputation. Many people hate going to dealerships and fear being scammed. The ability to buy online, knowing the car has been inspected, and being able to return it removes many friction points for the buyer.
-Carvana has grown very rapidly for several years, at over 100% growth rate, although in 2020, that pace won’t quite be reached, especially due to the effects of corona in Q2. But in Q4, it’s very possible that we will return to or get close to that triple-digit growth rate.
-I believe that 2020 will be, in a way, the definitive breakthrough year for Carvana. The coronavirus pandemic has also made buying cars online mainstream, and there is no return to the old ways in sight.
-Carvana is progressing well in virtually all metrics. Of course, the company’s operations are not yet profitable, but there’s a reason for this; the desire has been to invest in future growth rather than optimizing current results.
-Carvana’s model is to proceed market area by market area and continuously increase the number of available cars locally. A crucial part of this is building inspection centers (Inspection Center) regionally, through which customers can be better served.
-Furthermore, these investments create a moat against other competitors who cannot guarantee buyers the quality of cars and the crucial trust that the car they buy has been inspected and reconditioned. This removes one significant friction point from the buying experience.
-Over the next 1-2 years, I believe Carvana will continue to expand into new areas, open more inspection points, invest more in the entire buying experience, and build nationwide brand recognition.
-The company’s founder and CEO, Ernest Garcia III, is a passionate advocate for customer centricity. This is evident in everything the company does and how it operates.
-Garcia himself has a lot of “skin in the game”; he owns 600 million Carvana shares (Yesterday’s closing price was 261 dollars, so a considerable stake is at play…)
-Carvana’s valuation is by no means in the bargain bin. Market capitalization yesterday was 44 billion, and for example, P/S is around a good 20. But I approach this investment case using Brian Feroldi’s and Mats Christiansen’s thinking model: is the company in a market with a huge TAM, and can the company grow for years, even decades, and be a leading player in that market?
I see this as very possible for Carvana, and this is just in the United States; it is, of course, possible to expand in the future, for example, to Europe or even initially to Canada. But the company has consistently stated that the focus is now entirely on the United States, which is sensible because the market is indeed huge and very fragmented. Even the toughest competitors, like VRoom, fit in there well. Additionally, growth options include expanding the product range, for example, by including insurance; however, the company itself has not said anything about this, it’s just my own thinking.
Following this are a bunch of different materials for you to check out if Carvana interests you. I especially recommend listening to Mads Christiansen’s Carvana Q3 earnings review. Mads explains the long-term potential and what kind of moats are currently being built very well.
A week-old interview, Ernie talks about the goal of selling 2 million cars, with subtle hints of triple-digit growth in Q4 between the lines
Ernie’s interview on CNBC after Q3 earnings
Carvana’s latest investor presentation
Carvana’s Q3 earnings data:
Carvana is featured in this podcast discussing Internet business models and building scale. A really good podcast overall; Parameswaran has a strong track record, being one of the first investors in Bytedance (TikTok), among others.
https://www.joincolossus.com/episodes/22392883/parameswaran-internet-scale-businesses
A few excerpts from the investor presentation at the end:
Europe is pretty much in the same situation, meaning the industry is still extremely fragmented.
