Who Owns Carvana And What’s Behind Its $2 Billion Valuation?

Beyond the gimmick, convenience in car buying is sending Carvana’s stock soaring

Carvana, the self-described “Amazon for cars,” saw its revenue soar 127 percent and shares jumped 16 percent on the New York Stock Exchange, compared to the same quarter last year surpassing stock expert’s anticipated closing numbers. For reference, 20 percent growth rate in revenue is generally regarded as outstanding, and Carvana revenue beat that six times over!

Analysts are equally bullish. Of 11 analysts from B. Riley FBR INC who cover Carvana’s stock, five analysts gave them a BUY rating, three of them rated the stock as OUTPERFORM, three recommended it as HOLD, zero set the rating at UNDERPERFORM and zero rated it as a SELL. In other words, expert opinion is that Carvana’s stock value won’t be diminishing anytime soon.

Related: Can Carvana Car Vending Machines Disrupt Dealerships?

What is Carvana’s Origin and Growth?

The Tempe-based online used car dealership allows customers to finance, buy and trade in used cars online. But Carvana brings their online business model to life in a big way: They distribute cars in tall glass towers described as automated car vending machines.

Founded by Ernie Garcia and his son, the company unveiled its first “car vending machine” in late 2015 in Nashville. And while customers can pick up their purchased vehicle at these machines, they can also have the vehicle delivered.

When this nine-story gimmick made headlines, Carvana built 13 more towers within a 3-year span. Three stand in Florida while the others locations include Nashville, San Antonio, Houston, Austin, Dallas, Raleigh, Washington D.C, Ohio and Charlotte.

 When did Carvana Revenue Spike?

Carvana revenue continued its upward trend during the second-quarter of 2018, which recorded a 127 percent gain to $475.3 million. The spike was driven by a 111 percent increase in retail units sold, to 22,570 units.

Said Ernie Garcia, Carvana CEO and co-founder: “We had a strong first half of the year and are on track for our fifth consecutive year of triple digit revenue growth in 2018. We are well positioned to benefit from continued momentum as consumers demand a new way to buy a car.”

Carvana now operates in 73 markets across the United States and still has those 13 vending machines. The newest markets include New York City and the Bay Area with San Jose. “After opening nine new markets in the quarter, we now offer Carvana delivery to over half of the U.S. population,” Garcia said.

Related: New Windshield Technology: The Smart and Interactive Augmented Reality Windshield

 What’s the difference between Carvana vs. Traditional Car Dealers?

So how does the company continue to see such as major revenue increase each year, in a market that only grows 4 percent overall? Probably it’s their industry-leading customer service. Carvana offers a seven-day return policy, next day delivery service for customers within 100 miles of their markets, or a 10-minute customer pick-up from one of their 13 vending machines. Most importantly, perhaps, the company’s vehicles are about $1,500 cheaper on average than those at traditional dealerships. Carvana doesn’t have big car lots to maintain or rent.

Not only that, but people like shopping for cars outside the dealership. Browsing is open 24/7 – and there are no pushy sales people.

 What does the future hold for Carvana?

For the foreseeable future, Carvana is anticipating continued rapid growth in both vehicles and revenue. By expanding to new market locations, opening up new vending machines and continuing to stretch out their brand awareness through national advertising, Carvana enters 2019 at the top of every investors list.

Article written by Israel S. Rodriguez. Submitted: 10/19/2018

Israel Salas-Rodriguez is a recent graduate from Brooklyn College. He’s the former Sports Editor of the school’s newspaper, The Kingsman. He is a former contributing writer for the Brooklyn Listening Project and Brooklyn News Service. When he’s not writing, he enjoys nights out in the city with friends, typically where ever margaritas are served.


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