1. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Investors: 61
Carvana Co. (NYSE:CVNA) is a compelling investment opportunity in the used car market due to its innovative e-commerce platform and unique business model. As an online used car retailer, the company has transformed the traditional car buying experience in the US by allowing customers to browse, finance, and purchase vehicles entirely online, offering a selection of tens of thousands of cars. The company is famous for its unique “car vending machines”.
With services like home delivery and local pickup in over 300 US markets, Carvana offers an unparalleled level of convenience. The company’s customer-centric approach includes transparent pricing and detailed vehicle histories, along with a seven-day return policy that boosts customer confidence.
CVNA’s second quarter of 2024 was exceptional, showcasing the strength of its unique business model. The company saw a 33% increase in retail units sold and a 15% rise in revenue year-over-year. Carvana achieved record-breaking results, including positive net income and all-time highs in adjusted EBITDA and EBITDA margin. In Q2 2024, Adjusted EBITDA was $355 million, an increase of $200 million, while adjusted EBITDA margin was 10.4%, a 5.2 percentage point increase year-over-year.
Looking ahead, Carvana Co. (NYSE:CVNA) expects continued growth, projecting adjusted EBITDA of $1 billion to $1.2 billion for the full year 2024. This represents a significant increase from $339 million in 2023. The company is well-positioned for future expansion, with the physical capacity to handle approximately three times its current volume. Real estate from the acquisition of ADESA’s US physical auction business, consisting of 56 ADESA US locations totaling approximately 6.5 million square feet of buildings on more than 4,000 acres, could support vehicle reconditioning at a scale approximately eight times the company’s current run rate.
With plans for further improvements, combined with a vertically integrated supply chain that streamlines operations, Carvana Co. (NYSE:CVNA) has positioned itself well for growth in the expanding e-commerce automotive sector. As more consumers prefer online shopping, Carvana’s innovative strategies and strong market presence make it a promising investment opportunity.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 61 hedge funds held stakes in Carvana Co. (NYSE:CVNA). As of June 30, CAS Investment Partners holds 6.53 million shares of the company, valued at $840.65 million, making it CVNA’s most prominent shareholder.
Overall, CVNA ranks first among the 10 best used car stocks to buy according to hedge funds. While we acknowledge the potential of used car companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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