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I’ll give a more detailed $CACC post after I go through the K, but here are my major takeaways from the conference call:
1) This quarter kills the bull case. A story in 3 pictures.
1) This quarter kills the bull case. A story in 3 pictures.
Pic 1: Roberts “that would mean we lost share...” $CACC lost share in Q4. This abysmal quarter, with volumes down high teens and loan terms, sizes and advances growing...you lost share? I thought the current pain in the loan books was a sign share was going to grow? Guess not.
Pic 2: this “difficult environment” is the K shaped recovery everyone is talking about. Bad for subprime, good for the competitors. If you think that environment is improving under a Biden administration, I’ve got a bridge to sell you.
Pic 3: the only way the environment improves is by capital becoming less available. The problem for $CACC? They need money to be available as much as the next guy. The competitive environment could improve, but with it would come liquidity problems.
So my takeaways? This quarter is a fatal blow to the bull case. With volumes falling, future earnings will crater. A business facing this much competitive pressure should not be trading at 4x BV. It does not make sense. This isn’t about solvency, it’s about valuation.
In the end, I expect the stock to trade down appreciably, as bulls vacate out of fear of the impending earnings collapse.
