LOTZ Stock Forecast

CarLotz Inc. (LOTZ) stock that has dropped significantly over the past few quarters, falling more than 46% since mid-August 2021, despite strong Q3 results. So, what is the Lotz stock forecast now?

Lotz Achieves Record Revenues 

First founded in 2011, CarLotz, Inc. is one of the largest privately-held distributors of used cars, offering a consignment-to-retail used car marketplace. Its goal is to create the world’s greatest vehicle buying and selling experience, operating as a technology-enabled buying, sourcing, and selling model.

LOTZ share prices increased following the release of the company’s Q3 results. During this quarter, CarLotz achieved a record revenue of $68 million — more than double the previous year’s revenue. The areas of focus to achieve growth included its hub footprint, brand awareness, and technology transformation.

As of early 2022, CarLotz more than doubled its hub base, opening fourteen units year-to-date, for a total of twenty-two (only eight were open at the beginning of 2021). These newest hubs are located in Denver, Atlanta, St. Louis, Texas, Plano, Pomona, and other cities nationwide. This increase in hubs has increased inventory capacity by 226%.

CarLotz also focused on its team, adding strategic partners to build out product development, marketing, and finance technology. Despite the pandemic and significant labor shortages, the company remained 90% staffed as they grew. 

What Does the Future Look Like for CarLotz?

The company is increasing revenue and opening new hubs. So, when the retail-wholesale pricing environment becomes more favorable, CarLotz is set up to do rebound.

Because the company offers a range of products outside of used cars, it should be able to boost additional revenue streams to include insurance and financing products as well as extended warranties. It should be clear, though, that CarLotz does generate most of its revenue from the sales of used cars.

Data shows that the used vehicle market is significant, generating around $841 billion in 2019 alone. CarLotz has only made a small dent in the market, holding 0.02% of the U.S. used car sales by volume.

The pandemic has created some barriers across the industry and heightened the demand for used cars. A sustained semiconductor chip shortage has also negatively impacted companies like CarLotz. 

In addition, CarLotz plans to grow with the industry, and one area of focus is electric cars. The demand for electric vehicles is growing, and CarLotz has already been testing Teslas on the West Coast. The results have been very good, which is why the company has sent truckloads of electric cars around the country. 

CarLotz continues to forge strategic partnerships, setting the company up for future success. For example, on January 28, 2022, the company announced its nationwide partnership with Privacy4Cars, a technology company focused on creating privacy and compliance vehicle solutions.

According to Privacy4Cars, over 4 out of 5 cars sold last year contained personal data. This partnership supports CarLotz’s Personal Data Protection Promise, ensuring the secure removal of all personal information captured by vehicles. 

What Could Go Wrong?

The first consideration is the level of competition in the used car marketplace. There are roughly 50,000 used vehicles dealers in the United States, including large national dealers, like CarMax (KMX) and AutoNation (AN). CarLotz also competes with car rental companies, such as Enterprise and Hertz Car Sales. 

CarLotz is still unsure when the used vehicle market will return to normal. Also, the semiconductor chip shortage has limited the supply from CarLotz’s corporate vehicle sourcing partners. CarLotz’s largest corporate sourcing partner, which accounts for over 60% of cars sold during the Q4 2020 and Q1 2021, has since decreased the volume of vehicles available. 

The market is fragmented, and stakeholders will likely continue to experience a bumpy road ahead. Short-term, investing in CarLotz is undoubtedly risky. 

Is Now the Time to Buy LOTZ?

LOTZ share price will likely remain volatile, and its price is unpredictable. With a 52-week low of $1.68 and a 52-week high of $10.93, it’s tough to say what will catalyze LOTZ stock in the near term. For those who bought LOTZ at its high, this stock is a reminder that portfolio diversification is imperative. 

That being said, it is marginally undervalued with 5% upside to $2.04 per share based on a valuation analysis incorporated revenue multiples. For now, it may be best to sit back and follow the company’s initiatives. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.