When used for its adjective purposes, the word ‘dependent,’ according to Merriam-Webster, renders a definition “determined or conditioned by another, or relying on another for support” . From its genesis to mass production, an argument presented is that cars have transformed from an article of novelty to an item of dependency according to the definition specified above. The Office of Energy Efficiency & Renewable Energy for Fact#962 published that as of 2014, the United States boasted 816.4 vehicles per 1000 people. Compared to the numbers of other regions, the closest competitor is Canada, then the Western European and Pacific region, respectively . To further the argument of just how intrinsic a car is to an American household, the Bureau of Transporation Statistics reports that “households on average have more vehicles than drivers. Not surprisingly, households with more members are likely to have more personal vehicles available for regular use” . The report also highlights that “Ninety-one percent of the adults commute to work using personal vehicles.In comparison, only 5 percent of adults nationwide commute to work regularly using public transit” .
Very seldom can a commodity define America and its fabric better than a car! Setting aside the historical narrative, which shall be explored in a later essay, the idea of buying a car itself has taken a spin in 2020. The internet has allowed for a “CAR” to be auctioned, marketed, accepted, and sold. While I do not suggest that internet sales dominate the actual market share, it must be understood that it is a significant variable in the marketplace’s future. It was reported, “in June, used-vehicle sales rose 17% above the pre-pandemic forecasts, according to research firm J.D. Power” in the Wall Street Journal on July 3, 2020 . Brick and mortar car dealerships will always be the backbone of the auto sales market; the pandemic has forced many dealerships to host or offer virtual avenues to make the final sale still if the patron is reluctant to visit the dealership. Various online marketplaces such as CarMax (KMX), Carvana (CVNA), TrueCar (TRUE), CarGurus (CARG), Autotrader, and others are participants in this market space. The one company that caught my attention and I decided to invest in was CarGurus.com (CARG).
For starters, a Google Trends search for the terms above in the last ten years highlights that CarGurus has seen a significant uptrend when compared to other terms, similar to Carvana. A review of the company’s annual and quarterly balance sheet indicates a positive trend in retained earnings. A separate study of the cash flow statement allows us to learn that Free Cash Flow trend is positive as well . When these financials are compared to Carvana (CVNA), the difference is drastic and dramatic . Both companies have different approaches to the marketplace. Carvana wants to create a multi-faceted, customer-centered approach, whereas CarGurus is looking to provide information and a platform for car dealerships. In the recent earnings call, the company reported that while Marketplace subscriptions were only down 4%, Advertising and other revenues saw an increase of 17%, compared to 2019 . This develops not just confidence in the business model of CarGurus, but its brand appeal. I use Google Trends as a gauge to understand the request of a brand. With the mentioned financial indicators and the Google Trends chart, it was evident that CarGurus appeared as the company I chose to invest in participating in the car sales marketplace.