They have nearly identical business models, claiming to compete on customer experience and more accurate artificial intelligence for pricing. There are two larger and more established competitors, Carvana and Vroom, poised to eat up much of market growth. To understand why, one has to take a step back and look at the competitive landscape. Source: Shift Investor Presentation Shift Is Smaller Than Peers with No Competitive Advantage The most robust bull case for Shift is that it is the best way to be exposed to this rapidly developing trend. E-commerce penetration is under 1%, compared to 9% for groceries, 28% for furniture, and 32% for apparel. Given these characteristics, it is surprising that the market is only now starting to digitize. Car salespeople are the least trusted profession in the English-speaking world - the most frequently associated descriptors with the profession are sleazy, patronizing, confusing, and deceitful. Unlike other fragmented markets, like real estate, individuals typically do not have strong relationships with their salespeople. When Cox Auto revisited the issue in 2019, they noted that 61% of survey respondents found their last car buying experience the same or worse than their previous experience. According to a 2016 market research report by DealerSocket, 81% of customers do not enjoy the car buying process. Customers are also overwhelmingly unsatisfied with the current way of doing business. The market is also highly fragmented, with no industry player having more than 2% market share. In 2019, over $840 billion in used cars changed hands in the United States, roughly 1/3 more than total new car revenues. The used car market is a huge, untapped market. Prima facie, this seems like a logical move. Source: CapitalIQ: Ophelia Research Analysis Used Car Market Is Sizable and Ripe for Disruption Shift Key Operating Statistics FY 2017 to FY 2019 In FY 2019, Shift lost roughly $0.50 for every $1.00 in revenue it earned, significantly more than the $0.27 it lost in FY 2017.

Their operating and net losses have grown with sales, demonstrating a “growth at all costs” philosophy that management seems to be pursuing.

In FY 2019, they generated $166.2 million in sales, representing a roughly 75% increase from FY 2017. Their solution is “end-to-end,” which means that they not only sell cars to buyers, but they also buy cars from sellers, recondition them, and provide financing to buyers. According to their latest investor presentation, they target older (3-10 years) and lower-priced (under $20K) vehicles. Shift Technologies is an automobile e-commerce platform that specializes in used car sales. Despite this, it trades at a premium to peers, which we believe will certainly not persist once the market accurately prices in available information.

It is focusing on markets that consumers find unattractive and has not benefitted from COVID-19 as competitors have. It is a small-scale, late entry player in used car sales digitization with no clear advantage over incumbents. Since the completion of its business combination on October 14, 2020, Shift Technologies stock (NASDAQ: NASDAQ: SFT) has fallen precipitously despite upwards movement in the overall market.

Shift technologies inc company