LOTZ

Publicly traded companies mentioned herein: CarLotz Inc (LOTZ), Carvana Co (CVNA), Dufry AG (DUFN VX), eBay Inc (EBAY), Hertz Global Holdings Inc (HTZ), Moncler SpA (MONC IM), Nasdaq Inc (NDAQ), Shift Technologies Inc (SFT), Vroom Inc (VRM)

Highlights 

The presenter is long shares of CarLotz Inc (LOTZ), which converted from Acamar Partners Acquisition Corp (ACAM), a SPAC, on January 22, 2021. On October 22, 2020, Acamar announced a definitive business combination agreement with CarLotz to make CarLotz a public company. The transaction closed on January 22, 2021 and upon consummation of the merger, CarLotz was listed on the Nasdaq under the ticker symbol LOTZ. The SPAC is led by Acamar CEO Luis Solorzano who spent 20 years at Advent International, which has made successful high-growth retail investments such as Dufry and Moncler. There is also a blue chip investor base including the former CEO of GM, Rick Wagoner, and some large dealership groups. LOTZ is an omni-channel retailer comparable to other publicly-traded companies like CVNA, VRM, and SFT. Unlike those other retailers, LOTZ has a unique asset-light business model where it doesn’t take inventory but instead sources the vehicles at its hubs (lots) through consignment. People or companies looking to sell their cars loan them to LOTZ on consignment while still maintaining ownership of the vehicle. 85% of LOTZ’s cars are sourced from corporate partners and 15% is sourced from individuals. In turn, LOTZ markets and sells the car, while collecting a flat fee for those services (a $299 up-front listing fee and a $799 success fee taken directly from the sales proceeds). The company has also outlined an “aggressive” expansion plan in which LOTZ will open 14 new hubs in 2021 (it currently operates eight) in order to meet pent up selling demand from their corporate partners. The cadence of hub openings in 2021, 3-4 per quarter, will produce a compelling growth profile. Modeling out the hub openings, the presenter believes LOTZ will see accelerating triple-digit growth in each quarter this year. CVNA currently trades at 5x sales, but with a lower growth profile, worse unit economics, and a more asset-intensive business model than LOTZ. Applying that same 5x sales multiple (LOTZ’s higher profitability could justify a higher multiple) to his 2021 sales estimate of $400MM, he sees a price target of $17/share. Longer term, his estimate for 2022 and 2023 sales are $960MM and $1.7B, respectively. Applying that same 5x multiple to those estimates would imply a price of $37/share in 2022 and $63/share in 2023.