Is Carvana's Vending Machine Model Enhancing Efficiency?

Carvana Co. CVNA, a leading e-commerce platform for buying and selling used cars, has a distinct business model, which integrates a fully online car-buying experience with a vertically integrated supply chain. This enables the company to offer high-quality vehicles transparently, efficiently and at competitive prices.

Carvana sets itself apart from competitors through proprietary logistics software and an in-house delivery network, designed to move vehicles predictably and efficiently while enhancing the customer experience. In many markets, deliveries and pickups are handled by Carvana employees using branded haulers with same-day service available in select areas. 

Customers in certain regions can collect or return vehicles at one of Carvana’s patented car vending machines or other dedicated locations. These vending machines not only offer a unique and memorable pickup experience but also contribute to stronger brand recognition and help reduce variable fulfillment costs. CVNA sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Carvana has observed that the launch of a vending machine in a new market typically leads to increased market penetration and reduced variable operating costs per vehicle sold. In contrast, other major auto retailers such as Group 1 Automotive, Inc. GPI and Lithia Motors, Inc. LAD are taking a hybrid approach, introducing digital capabilities into their existing dealership operations.

Group 1 introduced AcceleRide in 2019 to allow customers to purchase new or used vehicles entirely online. The platform allows Group 1’s customers to explore various financing options, assess trade-in values and select home delivery. To enhance convenience, AcceleRide also incorporates manufacturer rebates and incentive offers, along with the ability to finalize all trade-in information digitally. 

Lithia's digital retail platform, Driveway, is designed to give customers full control over their vehicle ownership journey. Through Driveway, users can access a broad, nationwide selection of new, used, and certified pre-owned vehicles, with the option to have their purchase delivered directly to their home or picked up from one of over 290 Lithia locations within the Driveway network.

Carvana’s Price Performance, Valuation and Estimates

Carvana has outperformed the Zacks Internet – Commerce industry year to date. CVNA shares have gained 56.9% compared with the industry’s growth of 4.3%.

YTD Price Performance 

From a valuation perspective, Carvana appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 3.41, higher than its industry’s 1.98.
 

EPS Estimates Revision

The Zacks Consensus Estimate for 2025 and 2026 EPS has moved up 28 cents and 48 cents, respectively, in the past 30 days. 

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This article originally published on Zacks Investment Research (zacks.com).

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