More than just any debt burden, their enterprise value suggests a capacity to generate many billions of dollars of free cash flow from operations. This capacity simply does not exist.
Great article - I was surprised to hear that you are looking for a job (from your last article). Your writing is better than many other (employed) analysts put there.
another thing you can do is look at CVNA vs manheim... used car pricing market pricing can help with the reflexivity bc revenue outpaces cogs when prices in this part of the market are inflating, good catalyst is when the carrying cost of inventory + debt starts to deteriorate as affordability weakens = short set up is attractive. its a tough balance when online penetration still has room to move so much higher with CVNA being the dominant player
Manheim index flat QoQ so not much tailwind. They will probably continue to increase inventory since HTZ will most likely pull their inventory from their platform. CapEx spend (while not nominally large) should grow in 2H so FCF will not look so hot. My only question is that the company sees all this and wo why are they not trying to raise some equity to pay the debt off.
This write up is devastating for CVNA bulls. The detail about the Garcia family shuffling assets between entities to inflate numbers is the kind of forensic work most people miss. What strikes me most is how the market keeps giving them the benifit of the doubt despite multiple red flags. The used car market is also heading into a rough patch as those 2021-2022 loans start rolling over. Do you think the SEC subpoena is just for show or are they actualy building a case here? The debt maturites you outlined seem impossible to manage given their cash burn.
More than just any debt burden, their enterprise value suggests a capacity to generate many billions of dollars of free cash flow from operations. This capacity simply does not exist.
Great article - I was surprised to hear that you are looking for a job (from your last article). Your writing is better than many other (employed) analysts put there.
I certainly don't have the guts for shorting, but nice article! :-)
While I enjoy a lot your posts, I also hope you'll be finding the position you're looking for soon.
another thing you can do is look at CVNA vs manheim... used car pricing market pricing can help with the reflexivity bc revenue outpaces cogs when prices in this part of the market are inflating, good catalyst is when the carrying cost of inventory + debt starts to deteriorate as affordability weakens = short set up is attractive. its a tough balance when online penetration still has room to move so much higher with CVNA being the dominant player
Manheim index flat QoQ so not much tailwind. They will probably continue to increase inventory since HTZ will most likely pull their inventory from their platform. CapEx spend (while not nominally large) should grow in 2H so FCF will not look so hot. My only question is that the company sees all this and wo why are they not trying to raise some equity to pay the debt off.
This write up is devastating for CVNA bulls. The detail about the Garcia family shuffling assets between entities to inflate numbers is the kind of forensic work most people miss. What strikes me most is how the market keeps giving them the benifit of the doubt despite multiple red flags. The used car market is also heading into a rough patch as those 2021-2022 loans start rolling over. Do you think the SEC subpoena is just for show or are they actualy building a case here? The debt maturites you outlined seem impossible to manage given their cash burn.