December 1, 2020

Activity

Quick Take

LMP Automotive (LMPX) went public in December 2019, selling 2.645 million shares at $5.00 per share.

The firm has created an online platform and logistics network for selling or renting of automobiles in the United States.

LMPX may need to take a breather while the firm absorbs the Atlantic deal and we see further guidance going forward, so I’m Neutral on the stock at the current level.

Company

Plantation, Florida-based LMP was founded in 2016 to develop an online and offline automotive retail platform that enables the selling, renting, subscribing and financing of pre-owned and new automobiles.

Management is headed by Chairman, President, and CEO Samer Tawfik, who has been with the firm since 2016 and was previously founder and Chief Executive Officer of Telco Group.

LMP describes its business model as “Buy, Rent or Subscribe, Sell and Repeat,” where the company purchases pre-owned vehicles through auctions or directly from dealers and new automobiles at fleet rates from manufacturers and manufacturer distributors.

The company then either rents automobiles to customers or allows them to opt for a subscription plan for vehicles with a minimum usage of 30 days.

LMP then sells its inventory, including vehicles used for rentals and subscriptions, and hopes to repeat the same process again, as shown below:

Source: Company registration statement

Additionally, the firm provides the option to extend automotive warranties and schedule deliveries and pick-ups, typically through third parties.

Management’s expectations are over 90% of the firm’s fleet to be rented or subscribed and in use with the capabilities to support 1,000 customers using the company’s current facility.

Recent Performance

LMPX’ topline revenue by quarter has grown markedly since the firm’s IPO:

Gross profit by quarter has also grown according to a similar trajectory:

Operating income by quarter remained negative until the most recent reporting period, Q2 2020:

Earnings per share (Diluted) swung into positive territory in Q2 2020:

Source for chart data: Seeking Alpha

Since its IPO, LMPX’ stock price has risen 392 percent vs. the U.S. Specialty Retail index’ rise of 20.5 percent and the overall U.S. market’s growth of 18.7 percent in the past twelve months, as the chart below indicates:

Source: Simply Wall Street

Valuation Metrics

Below is a table of relevant capitalization and valuation figures for the company:

Measure

Amount

Market Capitalization

$267,200,000

Enterprise Value

$256,780,000

Price / Sales

14.38

Enterprise Value / Sales

15.01

Enterprise Value / EBITDA

-152.57

Free Cash Flow [TTM]

-$14,700,000

Revenue Growth Rate

-0.75%

Earnings Per Share

-$0.30

Source: Company Financials

As a reference, a relevant public comparable to LMP would be Carvana (CVNA); shown below is a comparison of their primary valuation metrics:

Metric

Carvana (CVNA)

LMP Automotive (LMPX)

Variance

Price / Sales

6.98

14.38

106.1%

Enterprise Value / Sales

3.14

15.01

377.3%

Enterprise Value / EBITDA

-57.59

-152.57

164.9%

Free Cash Flow [TTM]

-$886,940,000

-$14,700,000

-98.3%

Revenue Growth Rate

42.2%

347.0%

722.9%

Source: Seeking Alpha

Commentary

In its last earnings call, covering Q2 2020’s results, management highlighted its record topline growth

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