Is SFT a growth stock worth a buy today? Shift Technologies is a leading end-to-end auto e-commerce platform transforming the used car industry with a technology-driven, hassle-free customer experience.
The SPAC merger was able to generate over $340 million dollars in new capital from the transaction. The company has an online shopping platform and offers a sales model based on end-to-end service, designed to personalize the customer’s experience, even down to test drives and home delivery. Simply put, they connect car buyers and sellers.
Shift’s mission is essentially to make car purchase and ownership simpler for consumers. They provide 3-step full service auto sales. The first step is the acquisition, which involves the evaluation at consumer location and obtaining instant quotes from consumer cars. The second is the recondition which is done in house and is digitally enabled. And finally in the 3rd step they use Omni channel Sale, enabling customers to buy it now at any shift hub, having an at home test drive, and fully digital financing. They operate under a regional logistics focus which brings a lot of big advantages. These include reduced fulfillment costs, cost-efficient test drive logistics, streamlined inventory on boarding, and greater ease for customers as Shift s technology and logistics network allows it to cover a broader area than normal car dealers. More importantly they use a differentiated strategy which focuses on the largest segment of the used car market. Also over 85% of inventory is sourced from Shift’s customers and partners, making this process cheap and scalable.
The used car market is worth 841 billion dollars and is highly fragmented which presents a massive opportunity. Due to the global microchip shortage, automakers have had to slow their production, resulting in major delays in the availability of new vehicles. While that’s negative for automakers, the situation has provided strong tailwinds for the used vehicle market. Their growth strategy to exploit this opportunity seems very possible as well. With an initial focus on increasing market penetration and geographic expansion, to using strategic M&A and their omni-channel platform. Looking forward, the company raised its 2021 full year revenue guidance to the range of $575 million to $595 million in sales. At the midpoint, this represents a tripling in revenue year-over-year. Additionally, analysts estimate the company will grow its revenues by another 71.9% to 1 BILLION in 2022, which is crazy imo.
However it is important to note that their margins and EPS will need to improve as losses are supposed to continue throughout 2022. Despite not being profitable yet, there are many factors making me extremely bullish on this stock. First the market opportunity which is immense, due to the fragmented and huge nature of the used car industry. Shift’s growth plan to penetrate the industry is also extremely promising . Sales wise, growth is immense and profitability could be around the corner for the next few years.
