05-22-2021, 02:13 AM
$LOTZ is this bottom for Carlotz? Or do we go lower? I think worth $4 to $24 over a
<!-- SC_OFF --><div class="md"><p>Disclosure I do not own any shares. </p> <p>I came across LOTZ in a stock screener as I had set a price target of $5 and noticed it got close to it. To keep with the discipline of doing more research upon researching the 1st price target I dug deeper and did the following model. </p> <p>Summary Carlotz is really a lead-gen tech business to help rental fleets and consumers sell directly to retail vs. going through the auction process. They eliminate the extra step and fees that is entailed in auction houses. The company also allows consumers to sell their cars to other consumers with Carlotz being the "broker" that makes the process easy for both parties. The revenues are: flat fee from buyer, fee from seller (used to inspect, clean car and take pics), financing and insurance upsells and lease income. </p> <p>However, the company reports the total car sale as the revenue which is a bit funky but legal. This is why the GROSS margins are 10% to 12%, if the Gross Margins were the "revenues" the company would only show a revenue of $35 million for 2021 vs. $350 million, kinda hard to sell a SPAC at a $1.4 billion valuation when the revenues are $35 but with eventual "80% EBITDA margins". </p> <p>I ran a 10 year model and do believe the company can become profitable by 2023 unless they keep expanding more aggressively than modeled but by 2024 they can grow organically using cash flow. </p> <p>I think the stock is a buy at $4 since at this price we have some downside protection of the cash on the balance sheet of around $2 and at that price you are only paying a 1x enterprise value to multiple multiple which is on the low side compared to historical of Carvana, KAR and others. </p> <p>Would I want to own this business forever? No, but I think it can go from $4 to $10 to $15 pretty quickly if the GROSS margins go to 13% to 15% as they originally projected in their investor presentation, however in my 10 year model I do not see 15% margins until 2030z Management has missed guidance on revenues for 2021 and margins and the street doubts they can meet their numbers for this year. This is the risk and why I think it may trade lower in the short-term. </p> <p>2021 rev 330mm and 1x ev would be $4 and 2x ev is $8</p> <p>2022 rev is 850mm and 1x ev is $8 and 2x would be $16</p> <p>2023 rev would be $1.4 billion and 1x ev would be $12 and at 2x ev would be $24</p> <p>The execution risk is will they be able to meet these revenue targets and go from the current 10% gross margins to the 13% they said they would be able to do on the Octoeber 2020 investor deck. </p> <p>It could eventually become a takeover target as we have now 5 to 10 companies in this space and companies are always looking for growth. </p> <p>Anyway interested to hear your thoughts on this. I can definitely go more granular into the business model but for simplicity sake kept it short.</p> <p>Looking forward to your comments!</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ValueMaverick"> /u/ValueMaverick </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/nhvsxl/lotz_is_this_bottom_for_carlotz_or_do_we_go_lower/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/nhvsxl/lotz_is_this_bottom_for_carlotz_or_do_we_go_lower/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>Disclosure I do not own any shares. </p> <p>I came across LOTZ in a stock screener as I had set a price target of $5 and noticed it got close to it. To keep with the discipline of doing more research upon researching the 1st price target I dug deeper and did the following model. </p> <p>Summary Carlotz is really a lead-gen tech business to help rental fleets and consumers sell directly to retail vs. going through the auction process. They eliminate the extra step and fees that is entailed in auction houses. The company also allows consumers to sell their cars to other consumers with Carlotz being the "broker" that makes the process easy for both parties. The revenues are: flat fee from buyer, fee from seller (used to inspect, clean car and take pics), financing and insurance upsells and lease income. </p> <p>However, the company reports the total car sale as the revenue which is a bit funky but legal. This is why the GROSS margins are 10% to 12%, if the Gross Margins were the "revenues" the company would only show a revenue of $35 million for 2021 vs. $350 million, kinda hard to sell a SPAC at a $1.4 billion valuation when the revenues are $35 but with eventual "80% EBITDA margins". </p> <p>I ran a 10 year model and do believe the company can become profitable by 2023 unless they keep expanding more aggressively than modeled but by 2024 they can grow organically using cash flow. </p> <p>I think the stock is a buy at $4 since at this price we have some downside protection of the cash on the balance sheet of around $2 and at that price you are only paying a 1x enterprise value to multiple multiple which is on the low side compared to historical of Carvana, KAR and others. </p> <p>Would I want to own this business forever? No, but I think it can go from $4 to $10 to $15 pretty quickly if the GROSS margins go to 13% to 15% as they originally projected in their investor presentation, however in my 10 year model I do not see 15% margins until 2030z Management has missed guidance on revenues for 2021 and margins and the street doubts they can meet their numbers for this year. This is the risk and why I think it may trade lower in the short-term. </p> <p>2021 rev 330mm and 1x ev would be $4 and 2x ev is $8</p> <p>2022 rev is 850mm and 1x ev is $8 and 2x would be $16</p> <p>2023 rev would be $1.4 billion and 1x ev would be $12 and at 2x ev would be $24</p> <p>The execution risk is will they be able to meet these revenue targets and go from the current 10% gross margins to the 13% they said they would be able to do on the Octoeber 2020 investor deck. </p> <p>It could eventually become a takeover target as we have now 5 to 10 companies in this space and companies are always looking for growth. </p> <p>Anyway interested to hear your thoughts on this. I can definitely go more granular into the business model but for simplicity sake kept it short.</p> <p>Looking forward to your comments!</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ValueMaverick"> /u/ValueMaverick </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/nhvsxl/lotz_is_this_bottom_for_carlotz_or_do_we_go_lower/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/nhvsxl/lotz_is_this_bottom_for_carlotz_or_do_we_go_lower/">[comments]</a></span>Kind Regards R