1. Carvana Co. (NYSE:CVNA)
Year-Over-Year Sales Growth: 26.94%
3-Year Sales Growth: 2.19%
Number of Hedge Fund Holders: 84
Carvana Co. (NYSE:CVNA) operates an online platform that makes it easier for people to buy and sell used cars. It allows users to research cars, get financing, and arrange delivery or pickup. On March 7, Bank of America Securities analyst Mike McGovern maintained a Buy rating on the stock with a price target of $270.
McGovern believes Carvana Co. (NYSE:CVNA) is well-positioned for sustained long-term growth in the used car market, which he estimates to be over $800 billion. The analyst noted that the company is expected to improve its unit economics and leverage as growth accelerates. Moreover, he expects the company’s 2025 revenue to be $15.45 billion and EBITDA of $1.50 billion, which is slightly above estimates.
During the fiscal fourth quarter of 2024, Carvana Co. (NYSE:CVNA) achieved record revenue of $13.67 billion for 2024, reflecting a 27% increase compared to the previous year. It also reported a net income of $404 million and an adjusted EBITDA of $1.38 billion, with a 10.1% margin. Notably, management noted the company sold 416,348 retail units in 2024, a 33% increase from the previous year, and emphasized that it did this with only 1% of the market. It is the fastest-growing auto stock to invest in now.
Recurve Capital stated the following regarding Carvana Co. (NYSE:CVNA) in its Q4 2024 investor letter:
“One year is too short a time frame to evaluate anything and we will never be perfect, but overall, nailing Carvana Co. (NYSE:CVNA) mattered much more than anything else.
We assess our portfolio management performance by looking at the breadth of participation across the portfolio and by comparing our actual results to two parallel scenarios: (1) our performance relative to an equal-weight portfolio of the same positions, and (2) our performance relative to the actual portfolio assuming no further trading over the evaluation period. Encouragingly, our actual performance has been better than both alternate scenarios across substantially all evaluation periods. The primary exception is at the end of 2022, when an equal-weight portfolio would have produced better forward returns by having significantly more exposure to Carvana at its record-low prices. These analyses give me comfort that we add value through our active management and optimization of the portfolio.
We care most about portfolio-level returns which largely depend on slugging percentages, but we also know that having a consistent batting average is important. As shown in the chart below, the median position in our portfolio returned +35% in 2024 on a total return basis (including dividends), below our actual performance but nicely above the returns for the major indices. Carvana’s excellent performance in 2024 pulled our actual performance well above the median, but that was our intention given our large position size. We had healthy contributions across the portfolio, but we also benefited from great slugging percentages in 2023 and 2024…” (Click here to read the full text)
While we acknowledge the potential of Carvana Co. (NYSE:CVNA) to grow, 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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