Will acquisitions drive growth? Carvana closed its acquisition of ADESA's U.S. physical auction business, a wholly-owned subsidiary of KAR Global, for a whopping $2.2 billion.
The company funded the deal by taking on $3.275 billion in new debt.
While the price tag was controversial among investors, the acquisition will help Carvana add significant infrastructure,
team members, and vehicle selection, plus faster delivery times.
The addition will also boost its reconditioning operations and expand its production capacity by roughly two million units annually to over three million units total.
Once the acquisition is fully integrated, roughly 78% of the U.S. population will be within 100 miles of a Carvana inspection and reconditioning center.
Time to buy Carvana? It isn't a stretch to think that Carvana's stock was overhyped during the pandemic as it offered a perfect solution for online, contactless vehicle purchases.
At the same time, it isn't a stretch to think the stock is oversold as its GPU hit a speed bump and debt increased to fund its ADESA acquisition.
If management can take advantage of its new assets and offer an even faster,
bigger marketplace for used cars while improving its total GPU,
this could prove to be a great entry point in an intriguing automotive stock.
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