We recently published a list of 7 Best Car Stocks To Invest In Now. In this article, we are going to take a look at where Carvana Co. (NYSE:CVNA) stands against other best mid cap growth stocks.
Robotaxis: A Market Not To Be Ignored
A lot of the conversations in the automotive space right now, specifically with respect to electric vehicles, is the impending arrival of robotaxis – autonomously driven taxis for ride-hailing – in the US market and beyond. There are several major players in this market at present, including notable Chinese EV makers and, perhaps most importantly, Elon Musk’s well-known autonomous vehicle manufacturing company. With this new product set to be unveiled in less than a month now, many investors are wondering about how the automotive sector will develop as the world gradually shifts to electric vehicles.
A lot of the talk surrounding EVs has been discouraging these past few quarters, primarily because sales for EVs are down in light of higher price tags. The robotaxi business model is something that is thus generating a lot of excitement because this is a fresh new take on the EV space – and one that allows for the rise of EVs in a more cost-effective manner. According to ARK Invest’s Director of Investment Analysis, Tasha Keeney, robotaxis demonstrating a strong hold over the automotive sector and generating growth is something that investors can expect to see over the next five years. She thus believes that ignoring robotaxis is a huge mistake for those following Musk’s EV maker’s progress and the general EV space.
How Will Robotaxis Expand the Ride-Hailing Opportunity?
Keeney believes that Musk’s robotaxis will be able to take over a significant share of the ride-hailing market because it offers a cheaper option to ride-hailers – especially younger ones. Taking the example of China, where robotaxis are currently being utilized for rides that cost as little as under a dollar, Keeney noted that Musk’s company can undercut the ride-hailing market in the US in much the same way. These days, a typical ride from the most used ride-hailing platform in the US costs about $2 on average. With Musk’s robotaxis, ride-hailers can expect to fully reap the benefits of lower operating costs because of the EV platform.
By adding the autonomous driving factor on top of this, Keeney expects robotaxis to really leverage the cost structure and lower ride-hailing costs overall. Through this, the possibility of more people being brought into the ride-hailing market seems to look less like a distant possibility and more like an inevitable development. This is especially the case for younger individuals, who would see the benefit of foregoing buying new vehicles and instead opting to catch an autonomous ride that will likely cost them much less than a traditional ride-hailing service and definitely less than driving their own personal cars.
Despite all this, Musk is expected to face immense competition from other markets, particularly China, where EVs and robotaxis are being developed at speeds at least as impressive, if not more, than those seen in the US. Despite this situation of having to share market share with other players, investors can expect companies working in the EV space to see greater growth in the next few years. Considering the immense opportunity present in the automotive space based on this analysis, we have compiled a list of the best car stocks to invest in now.
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A customer buying a used car with the help of a finance specialist.
Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Holders: 61
Carvana Co. (NYSE:CVNA) operates an e-commerce platform for the sale and purchase of used cars in the US. It is based in Tempe, Arizona.
Carvana Co. (NYSE:CVNA) has been known to be a volatile investment; however, recent performance and developments highlight the fact that the company is continuing its growth trajectory. Between 2014 and 2024, Carvana Co. (NYSE:CVNA) has managed to grow its Gross Profit per Unit from $388 to over $7,000. Part of the reason for this may be the company’s recent focus on increasing profitable sales while pulling back on retail sales growth.
Another reason for Carvana Co.’s (NYSE:CVNA) growth and positive performance is that the company is actively working on cutting costs. In 2024, the company managed to cut over $1.1 billion of its annualized Selling, General, and Administrative expenses, and it also successfully restructured its debt to save about $430 million in annual interest expense. Through this, Carvana Co. (NYSE:CVNA) has managed to improve its liquidity, and with net income for the second quarter coming in at $49 million, investors feel more reassured about buying the stock right now.
A total of 61 hedge funds were long Carvana Co. (NYSE:CVNA) in the second quarter, with a total stake value of $5.1 billion.
Overall, CVNA ranks 3rd on our list of 7 best mid cap growth stocks. While we acknowledge the potential of CVNA as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. 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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Disclosure: None. This article is originally published at Insider Monkey.
