We recently published a list of the 10 Best Auto and Truck Dealership Stocks to Invest In. In this article, we are going to take a look at where ACV Auctions Inc. (NASDAQ:ACVA) stands against the other best auto and truck dealership stocks to invest in.
An Outlook of the United States Automotive Sales
On December 20, Cox Automotive reported that November retail sales figures of used vehicles rose by nearly 2% from October, reaching approximately 1.4 million vehicles. The figure indicated a robust demand as it marks a 13% increase compared to November 2023. Scott Vanner, a senior analyst at Cox Automotive, noted that sales are performing stronger than typical seasonal patterns, which usually see a slowdown due to adverse weather and reduced selling days during the holiday season. The current year has defied these trends with double-digit growth year-over-year. In addition, certified pre-owned vehicle sales also saw a month-over-month increase of 2.7%, rising from 203,272 units in October to an estimated 208,708 units in November 2024. However, on a year-over-year basis, CPO sales were down 3.5%, attributed to fewer available off-lease and trade-in vehicles.
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Looking ahead to the current month, another report by Cox Automotive expects sales volume for December to be around 1.47 million vehicles, representing a 7.7% increase from the previous month but flat year-over-year. Moreover, December’s seasonally adjusted annual rate (SAAR) for new-vehicle sales is projected to be 16.5 million, marking an increase from 15.9 million in December 2023 and matching November’s figure. Charlie Chesbrough, Cox Automotive’s senior economist in a December 17 report noted that the end of the U.S. election season has contributed to a boost in sales. Buyers are motivated by concerns about upcoming potential policy changes and EV discounts that may not last, leading to a favorable buying environment as 2024 closes.
In terms of quarterly and yearly analysis, the fourth quarter is anticipated to finish with a SAAR of 16.4 million, representing a shift to a higher sales pace since October. The report attributes these movements to better inventory levels and increased consumer confidence topped with lower interest rates. On the other hand, full-year new vehicle sales for 2024 are expected to reach approximately 15.85 million units, reflecting a 2.3% increase from the last year. Lastly, the report forecasts that new vehicle sales will continue to grow in 2025, potentially reaching 16.3 million units, driven by ongoing improvements in consumer confidence and favorable market conditions.
A row of used cars with shoppers inspecting them on a lot.
Our Methodology
To curate the list of the 10 best auto and truck dealership stocks to invest in, we used the Finviz stock screener. Using the screener, we aggregated an initial list of auto and truck dealerships and sorted it by market capitalization. Next, we sourced the number of hedge fund holders for each stock from Insider Monkey’s third-quarter hedge fund database. The list is ranked in ascending order of the number of hedge fund holders.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
ACV Auctions Inc. (NASDAQ:ACVA)
Number of Hedge Fund Holders: 27
ACV Auctions Inc. (NASDAQ:ACVA) is a technology-driven company that operates a digital marketplace designed specifically for buying and selling used vehicles among dealers. The company offers detailed and accurate information about the vehicles listed on its platform to help dealers understand how much a vehicle is worth and what condition it is in, before making a transaction.
The overall automotive market continued to face challenges with used vehicle inventories remaining below normal levels and retail sales of new and used vehicles relatively flat. ACV Auctions Inc. (NASDAQ:ACVA) remained focused on a growth strategy aimed at enhancing long-term shareholder value. One of the key components of its strategy entails the use of innovative technology to improve dealer experiences and operational efficiency. To achieve this, management introduced its AI-driven solution, ClearCar, which employs AI and real-time market data to provide accurate pricing based on vehicle conditions, thereby facilitating transparent interactions between dealers and consumers.
Moreover, management has also expanded its services to include logistics for vehicles purchased outside or at the ACV platform. Both of these initiatives are proving to be fruitful for the company as during the third quarter of 2024, it delivered $171 million in revenue which surpassed the high end of its guidance. The company sold 198,354 units during the quarter, indicating a 32% increase year-over-year, and also increased its GMV by 17% to $2.5 billion. Its transportation segment stood out and delivered a record revenue on the back of 108,000 vehicle transports during the quarter. Looking ahead management expects to generate $630 million to $634 million for the fiscal year 2024, indicating a 31% to 32% year-over-year increase.
Meridian Growth Fund stated the following regarding ACV Auctions Inc. (NASDAQ:ACVA) in its first quarter 2024 investor letter:
“ACV Auctions Inc. (NASDAQ:ACVA) operates a digital wholesale auction marketplace to facilitate business-to-business used car sales between sellers and dealers. It has disrupted the traditional physical used-car auction marketplace by attracting thousands of dealers to its online platform. ACV’s competitive advantage is its sizeable team of inspectors and the technology tools supporting this team. The depth and accuracy of ACV’s inspection reports provide buyers the confidence to bid aggressively, knowing that they are unlikely to contend with negative post-purchase surprises. Sellers are drawn to ACV due to its lower auction fees and large buyer base. The stock appreciated during the quarter on strong results and 2024 guidance that came in well ahead of expectations. After a challenging 2-year period characterized by low dealer inventories and high car prices, new and used car markets are showing signs of normalization. We expect ACV to continue growing market share and to generate higher margins as volumes return closer to normal (volumes remain approximately 40% below pre-pandemic levels). The company is also well positioned as the market continues to migrate from legacy physical auctions toward ACV’s more efficient digital platform. As fundamentals continued to improve during the quarter, we maintained a large position in the company.”
Overall, ACVA ranks 9th on our list of best auto and truck dealership stocks to invest in. While we acknowledge the potential of ACVA 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 ACVA 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.
