Yikes, down 97% from the ATH ($360 per share, now at $7.32). Haven’t seen a chart like this since 2001 
Warning : Some are predicting a stock price > $1.00 per share.
tecmo
…
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I will take the car at the top of the elevator please. 
Andy
KMX is only down 50% YTD. Who would have thought that a statement like this would be made as a positive remark about a stock! If you were betting on one vs the other at the end of last year though, ding, ding, ding! We have a winner.
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Some months later, …
I realize the salvage car business is different from Carvana’s primary business. However, with car inventory still tight, does the influx of flood-related vehicles in the car market put added pressure on Carvana?
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When I look back, there is one theme that repeats over and over is, we know very little. In fact, I have seen some company insiders comments/ thoughts and what happened in the next 2 years, we are not talking long-term, just couple of years, what transpired is very different. This is not like they are hit by COVID etc, it is simply most folks want to believe what they thought should happen, or going to happen, instead of looking at data or not influenced by one data point but look at it holistically.
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I haven’t followed it Kingran do you own it?
Andy
I don’t own CVNA, sadly I own some KMX. I should have, at least when I did a comparison of CVNA with KMX and realized CVNA has much superior margin vs KMX…
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Buffett in the latest annual report…
In 1863, Hugh McCulloch, the first Comptroller of the United States, sent a letter to all national banks. His instructions included this warning: “Never deal with a rascal under the expectation that you can prevent him from cheating you.” Many bankers who thought they could “manage” the rascal problem have learned the wisdom of Mr. McCulloch’s advice – and I have as well. People are not that easy to read.
Folks have deduced that this is about the Flying J purchase and Jimmy Haslam. The cost basis for the last purchase is considerably lower than the initial stake. Berkshire has sued and that resulted in reduced price, but they sued because they found irregularities, that impacted the valuation.
Of course one can argue, WEB famously does deals without extensive due diligence, hand-shake deals. But I guess this is not one of those. In any case, even the greatest investor can make mistake on the valuation.
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This reminds me of Avis and Hertz back at the 2008-9 recession era. I vowed to pay attention to these car sellers & renters if the opportunity arose and, of course, I failed to see this one.
Similar to Avis and Hertz, the market was not even valuing its inventory correctly, let alone its margins.
Pete
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The valuation is so stretched, shorts are circling.
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Wow everyone buying used because New is to expensive?
Andy
I think CVNA results has nothing to do with the used car vs new car. Of course CVNA sales are higher 16% on unit level, but the real difference is CVNA has close to 8% EBITDA margin vs 4% of KMX.
Essentially KMX is a finance company, i.e., they sell you cars, loan you money, then pool the loans, create ABS (asset backed securities) bonds and sell them to investors. So typically 4% to 5% they markup between the interest rate they receive and the interest they pay to the bond investors. That’s where the real profit is. Currently used car prices are declining, depreciating their inventory, and the pandemic, post-pandemic cohorts are defaulting at higher rates, which is outside their historical model, thus the provisions/ write-off on those losses are reducing the finance unit profit. This will resolve at some time. But KMX has to take a hard look at their loan model, and need to be nimble. Currently they are not.
Long-term KMX has to accelerate digital adoption, reduce the commissions, to increase the profit margins. But for now, CVNA market cap $20 B+ is 2x of KMX market cap of $11 B.
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Have to agree. First hand experience via a car purchase from Carmax in 2023. I was ready to make the purchase via bank EFT. Carmax agent tells me the company could not do that. The only two options were
- Carmax financing
- Banker’s cheque
There was additional run-around on option 2.
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On a fundamental basis it would have been very hard to buy it. The only way you would have is on the technicals. Even then it would have been hard to hang on.
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