The stock market hasn’t provided CarLotz (LOTZ) with an easy ride so far. Since going public in January, the shares have trended south nearly 40%.
Savvy investors should take note of this opportunity. At least, that is the gist behind Barrington analyst Gary Prestopino’s assessment of the consignment-to-retail business.
“We believe that CarLotz offers a compelling value proposition for both vehicle buyers and sellers offering a transformation growth opportunity in used vehicle retailing with a business model that is disintermediating traditional means of used vehicle remarketing,” the 5-star analyst said. “The company is rolling out a national presence to drive a network effect that should enhance shareholder value on a long-term basis.”
Prestopino’s comments come ahead of CarLotz’s 1Q21 earnings today (after market close). The analyst estimates that based on the sales of 1,900 retail units, the quarter’s revenue will reach $42 million and expects adjusted EBITDA to come in at $(14.4) million.
Looking ahead to Q2, Prestopino forecasts net revenue of $42-46 million and a net loss of between $15 and 16 million. The estimates are based on the company processing 1,900-2,100 units.
The analyst likes many things about CarLotz, including a business model which disintermediates wholesalers, and a two-sided market beneficial to both sellers and buyers. The company’s long-term growth prospects are appealing too.
Prestopino believes that CarLotz’ growth will be fueled by geographic expansion. The company currently has 10 hubs, and in 2021 plans to open between 14-16 hubs which should swell to over 40 hubs by the end of 2023.
“An expanded hub footprint should facilitate growth in supply from national corporate vehicle sourcing partners that was previously unavailable due to geographic limitations,” the analyst opined.
Prestopino notes that given the fact more than 15 million vehicles pass through North American wholesale vehicle auctions every year, and more than 7 million of these vehicles are consigned by corporate vehicle sourcing partners, CarLotz’s source of potential supply is “large.”
What’s more, Prestopino projects unit volume sales will reach 80,000 in 2023, which amounts to just 1.11% of total corporate consignment volume at wholesale auctions. As such, there is “ample opportunity” for CarLotz to gain market share.
So, good news for CarLotz, but what does it all mean for investors?
Prestopino rates the stock an Outperform (i.e. Buy) along with a $22 price target. The figure suggests upside of a whopping 232% from current levels. (To watch Prestopino’s track record, click here)
One other analyst has thrown the hat in recently with a CarLotz review and has reached the same conclusion – Buy. Together, the two reviews coalesce to a Moderate Buy consensus rating. (See LOTZ stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.