Carvana Co.
Consumer Discretionary · Specialty Retail
Structural: Online used car retail with vertically integrated reconditioning (ADESA, 56 sites) + in-house financing + branded delivery. 4k GPU to +$7k+ adjusted GPU after 2023 restructuring; SG&A per retail unit cut roughly in half. Capacity headroom from ADESA integration is the multi-year volume runway.
- Adjusted EBITDA inflected positive in 2023 and expanded through 2025; first full-year GAAP net income within reach.
- ADESA wholesale + reconditioning capacity supports 3M+ annual retail units vs ~400k current run-rate.
- Used car TAM ~40M units/yr in U.S.; online penetration still single digits.
- Debt exchange (2023) cut near-term interest burden; PIK toggle gives runway through cycle.
- Founder-led ($EBAY DNA via Garcia family); aligned with Ally ($ALLY) on loan origination flow.
- ~$5.6B long-term debt with 9-14% coupons; interest expense still consumes most of operating income.
- Rate-cut-sensitive: financing GPU compresses if used car APRs fall faster than borrow cost.
- Used car price normalization (Manheim index) reduces gain-on-sale tailwind that drove 2024 GPU.
- Competition: $KMX (CarMax) scale + dealer franchises + $AN, $ABG digital builds.
- High short interest + retail sponsorship = mechanical reflexivity; valuation untethered from EV/EBITDA peers.
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