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Calvana knows a lot about the dramatic changes in speed. Online car resellers boomed during the pandemic, but later slumped. Now it’s moving forward again. However, CEO Ernie Garcia is not thought to be the 2025 model like its 2021 predecessor.
Carvana sold 46% of the vehicles in the first quarter than a year ago, as nervous consumers were buying ahead of the possibility of future price increases. Already, second-hand cars have skyrocketed thanks to White House tariffs affecting many new vehicles, helping to raise Calvana’s stock price by a third this year.
Demand for used cars also rose in 2021 as Covid-19 halted production of new vehicles. Carvana’s market capitalization has since risen from $4.5 billion to nearly $600 billion, despite being largely unprofitable. By 2022, Calvana had become obsessed with bankruptcy, with some customers struggling with market value below $1 billion and high interest rates when they had high debt.
Garcia has been tinkering with many foods ever since. Carvana focuses on profitability by reducing marketing costs and other overheads. EBITDA margins are currently at record highs, with the company’s market capitalization reaching $600 billion until Thursday. Encouraged, Garcia pointed out in an analyst’s call Wednesday in an analyst’s call to sell 3 million cars within a decade, rather than the current demand bump.
To put that target in sight, it’s just a small portion of the 56mn annual general and used cars that turn over each year. And that suggests that stocks could be higher. Just over $30,000 per car, Carvana will earn $100 million in 2033. By reaching an EBITDA margin target of 13.5% and multiplying the resulting profit by 15 times, Carvana suggests it will be worth around $200 million by then.
There are some real dangers to navigate. Calvana has, after all, been chasing growth in a low margin high-speed business, and has recently been born out of near-death experiences. There are only infrastructures that sell over 1 million units a year.
There are also economic risks. Carbana lends its customers and sells it to financial investors, making it a kind of shadow bank. Of course, it’s a lucrative business.
One day, Carvana sees herself as an Amazon car sales company. To win that title, you need a brand that matches your cross-country logistics network. Better profitability is a good start. At the very least, Calvana could combine a sparkling look with a more padded interior.
sujeet.indap@ft.com
