Investment management company Kerrisdale Capital released an investor letter in June 2023 about its short position in Carvana Co. (NYSE:CVNA). A copy of the same can be downloaded here. You can check the top five holdings of the firm to know its best picks in 2023.
Headquartered in Tempe, Arizona, Carvana Co. (NYSE:CVNA) is an e-commerce platform for buying and selling used cars. On June 23, 2023, Carvana Co. (NYSE:CVNA) stock closed at $21.41 per share. One-month return of Carvana Co. (NYSE:CVNA) was 82.37%, and its shares lost 29.43% of their value over the last 52 weeks. Carvana Co. (NYSE:CVNA) has a market capitalization of $3.802 billion.
Kerrisdale Capital made the following comment about Carvana Co. (NYSE:CVNA) in the investor letter:
“We are short shares of Carvana Co. (NYSE:CVNA), a $4bn market cap online platform for buying and selling used cars. Originally hyped up as an innovative disruptor, Carvana is now recognized to be just a poorly run auto retailer struggling under the challenges of a severe industry downturn and the unsustainable burden of $6.5bn in debt. While many have shared concerns over Carvana’s business before, we voice ours at a time when shares have risen 165% in only a month on misguided optimism for profits that amount to little more than buffing the paint job on a totaled car.
Over its history of burning billions of dollars of investor capital to manufacture topline growth, Carvana has never generated sustainable profits or free cash flow. Even during the pandemic, when Carvana was virtually the only online option for scores of desperate car buyers willing to pay any price, the company failed to turn an annual profit. As the prospect of bankruptcy loomed, last year management began slashing costs, shrinking its operations and finessing working capital to try to generate positive free cash flow, and still failed. The company is pursuing a last-ditch attempt to sell markets on a new narrative, but ultimately, the business can’t escape the following reality: 1) whether a small local dealer or a tech-driven online platform, flipping used cars is a tough, capital-intensive business with lousy margins and, 2) any company can grow quickly and take share if run irresponsibly on costs, especially if capital markets are willing to foot the bill. Rather than representing true disruptive change, Carvana is a flawed player, armed with tools no better than the competition it seeks to disrupt and led by a management team which lacks seasoned automotive, operational experience. Carvana didn’t make money even when cars sold themselves, interest rates were low and used car prices were skyrocketing. Today, none of that is true anymore, and the company has no hope but to eventually restructure its massive debt load…” (Click here to read the full text)
Carvana Co. (NYSE:CVNA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held Carvana Co. (NYSE:CVNA) at the end of the fourth quarter which was 36 in the previous quarter.
We discussed Carvana Co. (NYSE:CVNA) in another article and shared the list of best meme stocks to buy. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
