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Proprietary Data Insights Top Specialty Retail Stock Searches This Month
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Source: Google Finance Number four in our proprietary Trackstar database of the specialty retail stocks investors searched for most over the last month. Number one on the list of stocks we wish we shorted. Carvana (CVNA). Down 90% over the last year. Crushed a whopping 39% this past Friday alone. Why? Because the company missed analyst expectations on Q3 earnings.
Due to economic uncertainty, Carvana didn’t provide 2023 earnings guidance. Morgan Stanley thinks CVNA could end up a $1 stock. The how to the why? The going thesis: High interest rates and recession fears have consumers thinking twice about making what is ultimately, as Carvana calls it, “an expensive, discretionary, often-financed purchase.” And, even though they’re still up 7.2% year-over-year, used car prices continue to fall, dropping another 1.1% between August and September. This is a double-edged sword. Carvana sells used vehicles, so as prices drop, the company simply can’t charge as much. But, with prices still high, consumers don’t necessarily want to make the purchase, especially in this high interest rate environment. Makes sense. However, for as many people holding off on a new (or used) set of wheels, quite a few are paying obscene prices. The Juice has eye-opening data on that now. |
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Who’s Paying More Than $1,000/Month for a Car?
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Key Takeaways:
Source: Edmunds Let this sink in:
We’ll explain what’s happening in a second, but first a quick, related thought on Carvana. If you’re going to pay through the nose for a used vehicle, why not just buy a new one? The Juice thinks this is one viable explanation for Carvana’s woes and the record number of people committing to new vehicle payments of $1,000 or more in Q3.
According to Edmunds, you can blame large trucks (and SUVs) in aforementioned Wyoming and Texas as well as Utah, which came in third at 19.1%. People in these states prefer these types of vehicles and are willing to pay big for them. Every vehicle on this list of the makes and models sucking up the most market share of $1,000+ monthly payments is a large truck or SUV. Source: Edmunds Going Electric
If what The Juice sees around our San Francisco and Los Angeles offices is any indication, this makes sense. You can’t blink without seeing a Tesla. As we recently detailed, the typical monthly payment on a Tesla easily crosses a grand. Going Luxury The brand commanding the highest percentage, by market share, of $1,000+ monthly payments: Porsche at 72%. Followed by:
While Edmunds didn’t include Tesla on its list, The Juice thinks Elon Musk’s company ranks at or near the top. Unless you’re putting a ton of money down or paying cash, you’re most likely into four-figure territory to finance a Tesla EV. Going Basic Even standard, run-of-the-mill vehicles aren’t easy on the monthly budget. While more accessible brands such as Hyundai, Kia, and Honda only capture single-digit shares of the $1,000+ monthly payment market, they’re not cheap. This has a lot to do with interest rates.
Source: Edmunds The typical monthly payment on a new car was $73 higher in Q3, 2022 than it was in Q3, 2021.
The Bottom Line: Needless to say, stay away from Carvana stock. Not so straightforward – the math on monthly payments. While we assume the wealthy among us can comfortably afford Porsches, Teslas, and other luxury brands, it’s also safe to say some people stretch themselves to make what is as much an aspirational purchase as a discretionary one. Edmunds notes you can save money by going with a shorter loan term. This might get you a break on your interest rate from the automaker, but even if it doesn’t, a shorter term tends to result in less interest paid over the life of the loan, albeit at a higher monthly payment. Of course, you’ll need good to excellent credit to score deals, particularly on interest rates. Which leads us to the most important takeaway: Ensure you can comfortably handle whatever monthly payment you take on. The last thing you want to do is miss a payment (or more) and put your credit at risk. |
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