Recurve Capital's Aaron Chan on the scalability of Carvana's $CVNA business model

This episode explores the investment thesis surrounding Carvana (CVNA), a controversial e-commerce used car retailer. Against the backdrop of Carvana's dramatic stock price fluctuations—from over $300 to single digits—the interview delves into the company's unique vertically integrated business model, encompassing financing, logistics, and reconditioning. More significantly, the discussion contrasts Carvana's profitability with its peers, highlighting its superior unit economics driven by operational efficiency gains from vertical integration and a distinct approach to financing. For instance, the guest points out that Carvana's gross profit per unit surpasses that of competitors, even after accounting for definitional differences in how costs are categorized. The conversation also addresses the numerous short-seller reports targeting Carvana, focusing on concerns about related-party transactions and the subprime nature of its loan portfolio; however, the guest refutes these concerns with data analysis. Ultimately, the discussion concludes with a valuation analysis, suggesting that Carvana's current market capitalization may undervalue its potential for substantial future growth, given its scalable infrastructure and ability to capture a larger market share. This implies a potentially significant upside for investors willing to navigate the inherent risks associated with the company's controversial history and high-growth trajectory.