I think Shift Technologies (ticker: SFT) is an absolutely overlooked diamond in the rough

I think Shift Technologies (ticker: SFT) is an absolutely overlooked diamond in the rough, and here's why:

Shift is showing outstanding YoY growth, like absolute A+ levels of growth. Exactly what you'd want to see from a high growth company. Market cap is around 195m, Revenue is 514m. Current trailing TTM P/S is 0.38… Revenue last quarter was up 200% (3x)!! Expected 2021 full year revenue is expected to 625M for a 219% gain. From there they are expected to double to about 1.2b in 2022. They currently have more cash (247m) than their entire market cap, and they've also secured 100m in floor financing to finance more inventory, which they've needed for additional inventory capacity to sustain their growth.

Heads up: Shift is NOT yet profitable! However, I believe that is entirely expected of a company in full high growth mode. They have been re-investing heavily into themselves: more facilities, more hiring, more web/app development, and lots of advertising. But with that spending, they have been able executing on their growth plan: their revenues have tripled, they increased gross profits by 58%, lowered their customer acquisition costs by 52%, and improved their overall net margin loss. If they. Continue down this path of growth, I 100% believe that they will achieve enough economies of scale to garnish enough overall gross margin, and spread their fixed expenses out over enough units to achieve net profitablely. And then from there it's gravy and open roads.

So what IS Shift?: Shift is a used-vehicle e-commerce platform that services both buyers and sellers.

Why used cars?: With all the semiconductor interruptions, it doesn't affect used cars negatively. It also doesn't matter what the new “flavour of the week” vehicles are being released. Nearly all vehicles eventually get sold used and often multiple times. Used vehicles will ALWAYS have a place in our economy.

The question comes down to where will you buy your used vehicle? A scummy used car dealership, where you shop by going from one physical dealership to the next, dealing with scummy sales people where they are commission driven, games are played, and you haggle on everything? Or a comfortable e-commerce experience where you can sort by nearly every possible input, where you can look at a vehicle from all angles (3D exterior/interior), see all the history of the vehicle and all the specs at a glance. Get your vehicle delivered to you, with the ability to test drive it before you purchase it? E-commerce shopping for used vehicles continues to become more popular, despite less than 2% of used auto sales being online… With used vehicles being a 1.7 trillion dollar industry, there's a lot of pie to go around. Shift is an early adopter to the used vehicle e-commerce sector, and they stand to gain plenty of market share over the next 10 years.

Bull case: I believe Shift could easily become a 20b company (20b would be 100x) or higher. Carvana which is in the same space, has a ~29.9b market cap with revenues of only 10.9b (P/S of 2.6). At a P/S of 2.6, shift would need about 7.5b in sales to reach a 20b market cap. They could get there in just 5 years @ 65% growth. Last quarter growth was 200% YoY and next quarter is expected to be similar. It's very possible they continue to push this torrid pace of growth, continue to lower reconditioning fees, get operating costs per vehicle down, which lifts growth profit per vehicle, achieve profitability, get a better P/S multiple from the market, and be worth 20b+ in 5 years.

And hey, if they are up 50x (10b market cap) in 5 years am I going to complain? Heck, even a 5x in 5 years would be outstanding, but we will probably see a 5x in 1 year. These guys are crushing it and the market has overlooked them. Once people realize what is infront of them, Shift willl start to get the attention it deserves. I think Shift is going to do great things and I'm very excited for them to keep growing.

Why not Carvana over Shift? Because Shift is grossly undervalued relative to Carvana. From here, Carvana can't 100x (3 trillion market cap? Nope). The value and potential are in favour of Shift from an investor angle. Stacking the two businesses up next to eachother, Carvana has the easy edge due to size, but I believe Shift is executing on their strategy better and is the better platform to sell and buy used vehicles. They aren't as popular, but the are best. It's possible for the little dog to take on the big dog if they stay hungry. And they don't have to overtake Carvana necessarily. With the used car market being a 1.7 trillion dollar industry theres tons of market cap to be shared among e-commerce used car dealers. Carvana has less than 0.5% of the annual used car market. If Carvana is absolutely dead set on acquiring more market share no matter the cost, they could potentially look at acquiring Shift at a premium to their share price now or in the future. I am a little bit worried about an acquisition, because I think it could make sense for other companies to want to gobble up Shift and get their market share on the cheap. I hope it doesn't happen any time soon, but it IS possible. For new investors, they'd likely profit greatly off that and be happy campers. I'd like to see Shift remain on their own and grow their business like I believe they can.

Risks: Well, some folks are worried that they won't actually ever achieve profitability. I don't agree with pegging a company as forever unprofitable, because they are not yet profitable. Essentially EVERY business needs a certain level of scale to be profitable. Shift is currently in a high growth mode and not a focus on profits mode (which would greatly hamstring their growth). Ok, but that leads to risk #2: other folks think shift will simply go bankrupt. Why? Because they are in a high growth stage, spending money, and in 4-5 quarters they could run out of cash. Then what? Bankruptcy? Well, not quite… Again many businesses need to raise cash multiple times during their growth stages. This is common practice. If they do need for raise cash, they will have a variety of financial instruments at their disposal in order to do so. They could issue bonds or perhaps they raise more cash from share holders (which would mean diluting shares), but again share dilution is quite common, especially amongst high growth companies raising cash. Say shareholders are diluted by 25%, but then the company value doubles because the threat of bankruptcy is removed everyone is happy. Or if the company achieves their goals and the stock eventually goes up 25-50-100x, some dilution in the early days is ok. Nevertheless, these are potential risks. No stock is without its risks, and it's important to do your own DD to try to understand the risks around whatever you are considering. I myself believe Shift will succeed and ultimately achieve profitability, and therefore I am willing to accept these risks.

Lastly, don't discount the fact that the last reported short interest was over 26% This has gotten to the point where Shift Technologies could easily squeeze and absolutely obliterate the shorts who took a far too greedy approach to Shift. Shift Technologies isn't just a 'squeeze' play. But I just wanted to point out the current situation it has come to where Short interest has grown rapidly and the stock has been heavily pushed down. I'm not big on the squeeze stuff, but hey, some people are all about the squeeze stuff, and power to them. With decreasing customer acquisition costs, gross margin increasing, revenue growing 150-200%, a strong used car market, cash greater than market cap, there's too many good things going on for this to be risky as all heck for short sellers as it starts moving north.

I've also been putting together an ongoing (updating daily) info report here: https://drive.google.com/drive/folders/1XfYtkHAJhg74o4hV8El0MCrL7xx9SISZ

There's a Google doc version and a PDF version, whatever is preferred. It's still a work in progress as I'm building up more sections, but there some core pieces there and about 6 pages of reading for those who are interested in learning more

Anyways, I think Shift is grossly undervalued and I'm buying Shift and sticking with my conviction that this is one of the best value plays of 2022 for the next 5-10 years

Disclosure: I have a LONG position on Shift consisting of shares and call options.