![]() ![]() As a result, there was a considerable QoQ increase in vehicle availability since late 2020, but as of, there were only 3.903 vehicles listed on the company's website. ![]() The management emphasizes the importance of eCommerce vehicles available for sale as a key measure of growth. We expect to have significantly lower spend and significantly better like half CAC going forward but, at the same time, be growing unit volume. We expect our total Q2 advertising spend to be substantially lower than Q1. However, management seems to have plans to limit spending in the near term: Therefore, additional investment in marketing and advertising is necessary to maintain the current momentum, improve its competitive position and sustain the growth trajectory. On average, for the last quarter, SFT spent three times more on marketing than its competitors, and this partly explains the traffic momentum since the start of 2020.ĭue to its small size, it is acceptable for SG&A to cover a more significant portion of its revenues. Justifiably, SFT is heavily investing in marketing to increase brand awareness and drive more traffic online. The company has high operating expenses, with SG&A standing at 47% of total revenues for Q1-2021, with the largest YoY increase in marketing expenses. In addition, as the company drives more online traffic growth that converts to higher sales volumes, it will eventually enable SFT to scale faster, pushing GPUs closer to the desired levels. ![]() The management has a midterm goal of $2.500 GPU figure mainly due to the margin expansion resulting from improving finance and insurance services. Despite the company's higher ASP levels than CNVA, the latter achieves a Gross profit per unit (GPU) of $3.656, 116% higher than SFT, which is expected considering its much larger size and volume. SFT has 87% of its inventory sourced from consumer sellers and has also incorporated more luxury cars in its inventory mix, driving up ASP by 30%, to $19.981, surpassing Carvana's averages. Source: Table created by author using data from Companies' SEC Filings. In addition, despite the increase in its cash conversion cycle due to higher receivables days during the last quarter, the company maintains a healthy cash cycle close enough to CNVA but much better than VRM. This signals a healthy inventory flow, and considering the much lower volume activity of the company, it suggests a large room for improvement as SFT scales up. Specifically, the company achieves higher inventory turnover, even better than CNVA that has a similar ASP, and as a result, achieves lower inventory days compared to its peers. Surprisingly, SFT outperforms the two leaders in terms of inventory management. To tackle potential differences in methods used to calculate the 'average days to sale' ratio between the companies, I have recalculated inventory days using the conventional accounting method. To that effect, used car used vehicle value has skyrocketed to unprecedented high levels, with the average price hovering around $25.000 price tag in June. Furthermore, a prolonged shortage of microchips and other electrical components throughout 2022 is expected to keep new cars supply below demand levels for the foreseeable future. As a result, the massive car demand pushes more consumers to used cars alternatives. Global production and supply chain issues in the automotive industry have caused severe demand, supply imbalances, and new car shortages. While CVNA and VRM are leading the market, absorbing most of the online traffic, SFT enjoys faster traffic growth. However, the market is massive, estimated at $840 billion, used car demand is still booming, and shifting behavior and broader digitalization impact provide a compelling growth story for Shift. ( CVNA) and Vroom ( VRM) growing at fast rates. Indeed SFT operates in a highly fragmented market with low online sales penetration levels at just 2%, with much larger and well-capitalized competitors with similar business models of Carvana Co. The article explores its online activity and some of its key operating performance metrics and compares them with the competition to understand its overall health and growth prospects. ( NASDAQ: SFT) if you can tolerate risk, a potential game-changer with a compelling growth story. ![]() Following the recent cooling-off of the used car market, it may be the right time to consider an investment in Shift Technologies Inc. ![]()
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