Carvana (CVNA), which just made its IPO debut in late April, is trading nicely higher today after reporting its first quarter as a public company. Since you're probably not familiar with Carvana, a little background would help. It offers an eCommerce platform for buying used cars.
We think of it as sort of a cross between Amazon (AMZN) and CarMax (KMX). It's like Amazon because it's all online (no car lots) and the car gets delivered to you. Also, like Amazon, Carvana saves a lot of money by not having vehicle showrooms which carry a lot of costs (rent, salespeople salaries, electricity, insurance, heat etc.) This allows them to price their cars on average $1,430 below Kelley Blue Book Suggested Retail Value.
It's similar to CarMax because it's also a no-haggle pricing format and, like CarMax, you can choose from thousands of cars nationwide and have it shipped. You are not limited to just the few hundred on a traditional dealership lot. This is a new paradigm for buying used cars, time will tell if it works out.
Carvana is attempting to disrupt an industry that you would not think would make sense to go all online, but it may work. It's working in the mattress world with online-only suppliers like Tuft & Needle, Casper, Saatva taking considerable market share from brick-and-mortar mattress stores which seem to pop up on every corner. You would think consumers would want to feel and test a mattress in person, but the online companies are doing very well and are disrupting that market. Carvana and others are adopting this model in the used car market. Would you buy a used car without touching it, test driving it etc.? We shall see.
Turning to the Q1 results, Carvana reported a non-GAAP loss of $(0.28) per share, which was better than expected. Revenue rose 118.1% year/year to $159.1 mln, which was basically in-line. Retail units sold increased 120% YoY to 8,334. The guidance was quite good as the company expects Q2 revenue of $193-203 mln with 10,000-10,500 retail unit sales. For all of 2017, revenue is expected in the $850-910 mln range. CVNA is guiding to 44,000-46,000 retail unit sales in 2017.
In sum, it has been a rough ride since the IPO priced at $15, we will see if this earnings report can get the stock moving up again.