WeBuyCars Holdings Ltd (JSE: WBC) has defied the odds, navigating through a challenging economic landscape to deliver impressive results for the six months ending March 31st, 2024. Despite facing headwinds from high interest rates and escalating fuel costs, the company showcased resilience with a remarkable surge in unit sales by 13.4% to 80,538, propelling revenue to a notable 15.9% increase to R11.4 billion. This stellar performance translated into a substantial 26.6% boost in core headline earnings, reaching R402 million.
However, amidst these triumphs, WeBuyCars remains cautiously mindful of looming macroeconomic challenges. The economic environment, characterized by lower consumer confidence and soaring interest rates at a 15-year high, threatens to dampen new vehicle sales volumes, potentially impacting WeBuyCars’ business outlook. Despite this backdrop, the company’s share price has seen an impressive 10% gain since its listing on the Johannesburg Stock Exchange in April, attracting keen investor interest.
Source: Trive – Koyfin, Nkosilathi Dube
As a leader in the second-hand vehicle industry, WeBuyCars holds a coveted position in the market, drawing investors eager to capitalize on its success. Yet, amidst these accolades lies a looming threat: the persistent strain of rising interest rates on consumer spending patterns. The question remains: will WeBuyCars successfully navigate through these challenges and sustain its impressive growth trajectory?
Technical
WeBuyCars‘ price action tells a story of resilience and investor enthusiasm. Initially facing downward pressure post-IPO, the stock dipped below its IPO price to R18.95 per share. However, this level quickly transformed into a robust support zone as eager buyers stepped in. Buoyed by an uptick in buying volumes, the stock rallied, surpassing its IPO price and is trading above the 10-day moving average, indicating a short-term uptrend.
Despite encountering resistance at R22.00 per share, sparked by bearish pressures which led to back-to-back days of losses, upbeat half-year results reignited investor interest. Buyers flooded the market, driving demand higher for WeBuyCars stocks. This surge in demand propelled the stock’s upward trajectory, showcasing the power of market sentiment.
Looking ahead, if upside momentum persists, attention may turn to the 61.80% Fibonacci Extension Golden Ratio as a potential target for further gains. This dynamic interplay between technical levels and market sentiment underscores the evolving nature of WeBuyCars’ price action as investors navigate opportunities in the stock market.
Fundamental
WeBuyCars has showcased remarkable resilience and adaptability in the face of challenging macroeconomic conditions, as evidenced by its stellar half-year performance. Despite the backdrop of stubbornly high inflation and interest rates, which have significantly constrained consumers’ disposable income, WeBuyCars managed to achieve record-breaking sales figures in March 2024.
The latest data from the Automotive Business Council (Naamsa) paints a sobering picture of the vehicle sales landscape in South Africa. New vehicle sales plummeted by 11.7% in March compared to the previous year, with year-to-date sales also registering a 5.3% decline. The aggressive monetary policy stance of the South African Reserve Bank (SARB), characterized by consecutive interest rate hikes, has contributed to this downturn. With interest rates at a 15-year high, consumers face increased financial strain, exacerbated by rising fuel prices.
Source: Trive – Koyfin, Nkosilathi Dube
WeBuyCars’ performance stands out as a beacon of success in this challenging environment. March 2024 witnessed a record-breaking sales month for the company, with 14,285 units sold. Financially, WeBuyCars has demonstrated robust performance, generating a significant cash flow from operations with a notable 96.6% year-on-year increase to R267 million. This financial strength enabled the company to distribute dividends totalling a substantial R3.41 billion during the year’s first half, underscoring its solid financial position. This remarkable achievement can be attributed to a combination of factors. Higher volumes, rising average selling prices, and improved margins have all played pivotal roles in driving earnings growth. Furthermore, operational efficiencies, including faster inventory turnover and economies of scale, have bolstered profitability.
Despite its impressive performance, WeBuyCars remains cautious about the future. The tough economic environment, characterized by lower consumer confidence and steep interest rates, poses significant challenges. With WeBuyCars holding a substantial 32% market share in vehicle sales in March, its cautious outlook reflects the broader sentiment within the industry.
Source: Trive – Koyfin, Nkosilathi Dube
Summary
In conclusion, WeBuyCars’ half-year performance is a testament to its resilience and strategic agility in navigating challenging economic conditions. While macroeconomic headwinds persist, WeBuyCars’ strong market position, financial robustness, and operational efficiency position it well to weather the storm and capitalize on opportunities in the dynamic automotive industry landscape.
Sources: WeBuyCars Holdings Ltd, The Automotive Business Council, Reuters, Trading Economics, TradingView, Koyfin
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
