Carvana Stock Review: Wide-Open Opportunities for Expansion

TL;DR

Carvana plans to expand its presence in the United States by increasing its reach to 56% of the population, focusing on markets with populations over 200,000. The company aims to build more delivery-only markets and Vending Machines, investing in brand-building and infrastructure to support its triple-digit growth. With the used car market being highly fragmented, Carvana sees significant opportunities for expansion.

Transcript

Vincent Shen: In this next part of the show, I'd like to look a little bit ahead to the horizon at some of the growth opportunities for this company. Currently, Carvana is in 82 markets. They have 14 Vending Machines in the U.S. right now. The company says that they should be within reach by the end of 2018 of 56% of the U.S. population. In terms o... Read More

Key Insights

• 🌱 Carvana plans to expand its reach to 56% of the US population by targeting markets with populations over 200,000.
• 🏛️ The company is focused on building delivery-only markets and Vending Machines as part of its growth strategy.
• 🔬 Carvana is investing in infrastructure, including reconditioning centers, to accommodate its expansion and reduce transportation costs.
• 😨 The used car sales market is highly fragmented, presenting a significant opportunity for Carvana and other companies in the industry.
• 💪 The company aims to establish a strong brand presence and generate buzz in targeted locations through the launch of Vending Machines.
• 🚚 Carvana's growth has been driven by its repeatable expansion model, which costs $500,000 for a delivery-only market and $5 million for a Vending Machine.
• 👶 The new inspection and reconditioning center in Indiana will expand Carvana's capacity to handle over 250,000 vehicles annually.

Questions & Answers

Q: How does Carvana plan to expand its presence in the United States?

Carvana intends to increase its reach to 56% of the US population by the end of 2018 by targeting 200 markets with populations over 200,000 people. It plans to establish delivery-only markets and Vending Machines to accelerate growth.

Q: What is the cost difference between establishing a delivery-only market and a Vending Machine?

Carvana states that it costs the company $500,000 to establish a delivery-only market, while a Vending Machine requires an investment of $5 million. Despite the higher cost, Vending Machines are seen as brand-building tools that generate buzz in local markets.

Q: How is Carvana supporting its growth in terms of infrastructure?

Carvana is building the necessary infrastructure to accommodate its expansion. It plans to open a new inspection and reconditioning center in Indiana in 2019, which will be the fifth one for the company. This expansion will allow Carvana to handle the expected unit sales of over 250,000 vehicles in full-year 2018.

Q: What is the size of the used car sales market and the opportunity for Carvana?

The used car sales market was worth almost $800 billion in 2017, and the top 100 largest used auto retailers only captured 7% of the market. Carvana sees significant opportunity in this fragmented market, where the largest player has less than 2% market share.

Summary & Key Takeaways

• Carvana aims to reach 56% of the US population by the end of 2018, expanding its presence in 200 markets with populations over 200,000 people.

• The company plans to establish delivery-only markets for just $500,000 and Vending Machines for $5 million to accelerate growth and build its brand.

• Carvana is investing in infrastructure, such as reconditioning centers, to accommodate its expansion and reduce transportation time and costs.