Stock of the Day – Carsales (CRZ)


Carsales Organization Structure (Source – Company Reports)
 
Carsales is predominantly dependent on the car dealer network, which contributes 44% of revenues, while the private market is a growing component of the business and represents 16%. We see advantages in growing the private revenues to diversify the reliance of the business away from the dealers. Dealers offer a compelling one stop solution from trading vehicles to finance and servicing. Offering easily accessible online financial services will improve the accessibility of potential buyers to go direct and access the private channel of inventory.





Carsales Financial Highlights (Source – Company Reports)

Competitor, Carsguide, created through a joint venture between News Corporation and a collection of large dealer groups, demonstrates the strategic move by the car dealers to break the market dominance of carsales. Carsguide is offering free advertising to attract private advertisers while associated dealer groups have added their inventory to build up the appeal of the website. News Corporation contributes journalistic content to offer appeal for car advertisers and consumers.







Carsales Daily Chart (Source – Thomson Reuters)
Car dealers have been consolidating since the global financial crisis making them stronger players in negotiating with advertisers and online aggregators. In our view it is in interest of Carsales to improve the appeal of transacting through the private channel to fragment and weaken the strength of the dealer networks. We believe the stock is expensive at the current price and would review the stock at a later date.

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