Collapse of Carvana; Is this the end of Bronco ADM

[NJRoadkill]

Might be some inventory coming soon.

“Since announcing its quarterly results on Nov. 3, Carvana (CVNA) shares have lost 44% of their value and are currently trading at $8.06 versus $14.35 on that day. This translates into a decline in market capitalization of approximately $1.1 billion in two weeks. Carvana currently has a market value of $1.43 billion.”

https://apple.news/AM2671y5OTTuHTrTG7jvcfA

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[Newbie]

https://seekingalpha.com/article/40...ar-sales-business-backed-unethical-management

 

[GI_Jo_Nathan]

What does this have to do with ADM? If Carvana collapses it's because they are bad at what they do and have major issues.

 

[zyglyrox]

What does this have to do with ADM? If Carvana collapses it's because they are bad at what they do and have major issues.

yeah, I don’t think buying up dozens upon dozens of cars from people way over market value to resell at way over market value is an ADM thing. they just dug themselves a hole.

 

[3G & 6G]

Unfortunately it will likely be a while before Carvana inventory hits the market at a largely reduced price. They can operate under bankruptcy protection for a long time. They may drop prices a little more (they are a bit lower than they have been for Broncos), but I think a more likely scenario is someone else buying their platform while they are heavily distressed. If a Penske, Hendricks, Sonic, etc were to snatch them up they wouldn't undercut their existing franchises by liquidating the Carvana inventory at a huge discount.

Now if no one steps in to buy Carvana at a huge discount, Carvana themselves may be forced to drop prices much more than they have been. Watch what they are buying (or really what they are not buying) to get a glimpse into how quickly this may happen.

 

[widnere12]

My understanding is that Carvana’s real issue is HOW it does its business more than anything

To oversimplify it, they’re basically the GameStop of used cars. They pay for a used vehicle…sometimes too much, and resell as high as possible. Similar to Carmax, but without any of the good things that Carmax has to offer.

Over time, they build a business model that was dependent on higher than normal margins.but never really profit.

As the used car market has dried up, they’ve lost access to their cheap inventory and they’re having to purchase at values far higher than normal, and actually overpaying for cars, hoping to be able to sell at overinflated prices, but in the end, shrinking their margins beyond what can be sustained.

There have also been many accusations that Carvana has some “questionable” business practices as well

 

[3G & 6G]

Much like a Silicon Valley tech company, Carvana's MO was to show rapid growth at any price. Growth was the message, not profitibility. Also like a SV tech co, they have only shown a profit in 1 quarter since they were formed. As long as investors keep pouring money into a growth company, that works fine. As soon as the growth narrative dies so does the funding. This MO had a huge impact on them overpaying for cars, amplified by the crazy market the last 18 months.

They HAD to show growth.

A nearly $500M loss in Q3 22 with guidance for Q4 22 to be even worse. Will be interesting to see how this shakes out.

 

[Saw4Fire]

What does this have to do with ADM? If Carvana collapses it's because they are bad at what they do and have major issues.

I would argue that it indicates that used car values are dropping as interest rates rise and demand for cars declines. I posted a piece on the collapse of C8 Corvette prices in the used market. The Corvette and the Bronco are both "halo" vehicles that have high demand. That demand is beginning to wane.

 

[Felix808]

Shady business dealings will do that to a company.

 

[GI_Jo_Nathan]

I would argue that it indicates that used car values are dropping as interest rates rise and demand for cars declines. I posted a piece on the collapse of C8 Corvette prices in the used market. The Corvette and the Bronco are both "halo" vehicles that have high demand. That demand is beginning to wane.

In general maybe. But Carvana is a bad example. They are literally a trash company.

 

[GI_Jo_Nathan]

Shady business dealings will do that to a company.

This.

 

[Hot cheetos]

My only experience with them is them buying my wife’s old Honda Accord with over 300k miles on it and all sorts of problems for $2k….she took that money and ran. No way a company can be stupid enough to pay that much for that car and survive.

 

[Hossfire]

I worked for Carmax (briefly) around 15 years ago. Carmax doesn't sit on inventory. Anything too old, too many miles, or not worth fixing to sell is auctioned off. Vehicles that are not moving are systematically reduced in price until they sell. This inventory discipline allows them to borrow less. Carvana is probably being killed by high inventory and rapidly increasing debt costs.

 

[BostonSasquatch]

Also like a SV tech co, they have only shown a profit in 1 quarter since they were formed.

As long as investors keep pouring money into a growth company, that works fine. As soon as the growth narrative dies so does the funding.

They HAD to show growth.

A nearly $500M loss in Q3 22 with guidance for Q4 22 to be even worse. Will be interesting to see how this shakes out.

Not to defend Carvana, but how long did Amazon run on hope and investor money before it turned a profit?

 

[GI_Jo_Nathan]

To oversimplify it, they’re basically the GameStop of used cars. They pay as little as possible, and resell as high as possible.

There have also been many accusations that Carvana has some “” business practices as well

Its actually a little different from that. They tend to buy on the high side and sell in the middle. Their intent is to make the money on financing, which doesn't always work out.

And yes many bad practices have been reported.

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