CarvanaCo. NYSE: CVNA Recommendation: BUY Analyst: …

Carvana Co. NYSE: CVNA Recommendation: BUY Analyst: William Schipke

Used Car Salesmen are Caricatures for a Reason

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...And They Are Endangered

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Investment Thesis

Recommendation

Carvana Co. (NYSE: CVNA) is a BUY because it is the first mover to revolutionize the used-car retail industry. It is a disruptive company not just because it offers next day, free delivery, vending machines where you can get your car, or the ability to buy a car and receive financing within 15 minutes while sitting on your couch. It is disruptive because it is attacking the entropy of buying a used car ? no hassles, no ulterior motives by salespeople, no time wasted wandering around a small lot ? and centering its business on the customer with a 21st century, asset-light business model.

Rationale

1 Carvana's Solution to Buying a Car ? Best Selection, Best Value, & Best Experience

2 Unparalleled Business Model & Strategy

3 Scaling Internet Business, Feedback Loop, and Optionality

Price Target: $47.07 +30.3% Upside to Current Price of $36.14

Source: Company Filings

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Company Background

Company Overview

Leadership Team

? Leading eCommerce platform for buying used cars

President & CEO Ernie Garcia III

? Launched first market in 2013 (Atlanta), now 84+

? Co-founded company in 2012

? 2015 Revenue: $130mm

Financial Highlights

Share Price (as of 2/20/2019)

2018 Est.: $2 bn $36.14

? B.S. in Mgmt. Science and Engineering from Stanford Uni.

? Held various roles at Drivetime Automotive Group including MD of Corporate Finance

Enterprise Value 2017 Revenue

$5.03 bn $858 mm

CFO Mark Jenkins ? Joined in July 2014 ? Prior ? Finance Professor at Wharton

EDITDA Margin

( 16.7% )

? Ph.D. in Economics from Stanford

3 Year Revenue Growth CAGR

148.8%

? Dissertation on Auto Lending Market

Post-IPO Share Price Performance ($/share)

$80 $70 $60 $50 $40 $30 $20 $10 $0

Apr-17 May-17 Jun-17

Three straight quarters of revenue and retail unit spark

buying

Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18

CVNA falls as large retailer invests in rival company

(49.0%)

Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

Source: Company Filings and Website

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