I increased my Sixt position by 36% at a price of €49.25.
Even after the increase, Sixt remains my smallest stock position, but I might be interested in expanding it further, especially if prices continue to fall or we can find even more evidence that Sixt can continue to operate well under it’s next generation of Sixt leaders.
My main reasons are:
- The Sixt stock price got significantly more attractive during the last months and I have been considering an increase for a while.
- The business appears to be performing well on an operation level, as can be seen by the 13% increase in EBITDA and accelerated growth in the United States.
- I see the decline in residual values as a temporary problem. Therefore, it makes sense, in my opinion, to consider not only EBT but also EBITDA.
- Procurement conditions for new cars improved. Sixt is now able to get new cars with 98% repurchase agreements in the European market. This means the depreciation risk will improve over time as the European fleet is renewed. (I think that takes on average 9 months)
The U.S. depreciation risk will continue, but I think it should only be elevated for a maximum of the next years as used vehicle prices decline from elevated levels. After that the industry will hopefully adjust with higher prices even if the spread between used and new cars stays persistently large.(Car rental companies buy new cars and sell used cars and therefore want a tight spread)
I think we might want to focus on both U.S. used and new car prices (in nominal terms) and it’s spread as part of an automotive tableau @Magaly - The larger problem of pricing improved for Sixt and it’s U.S. competitors due to focus on value over volume esp. from it’s competitors. Sixt now claims it also wants to operate a tighter fleet. The problem of pricing can be seen by the fact that Sixt rental vehicle assets increased by 20% from H1 2023 to H2 2024 to 5.54 billion while revenue only rose 8.9%.
- The tourist industry is still strong and performing well.
- I like Sixt’s improved social media marketing and think their website, which makes it incredibly easy to book a car instantly, is well made.
- I rented a Sixt car in the United States from Sixt and thought it was a very good experience similarly to my experience with Sixt in Europe.
@Aron, What is your take? Do you think I am missing any key points? Why do you think performance in Europe was disappointing? What was expected? What could be the reasons?
If needed, I would always be happy to revert any decision.
Ps: It would be interesting to study costs per region and their revenue /ebitda performance in more detail. As an example, it would be interesting if we could find out which part of interest rate payment and depreciation increase we could attribute to U.S. growth to see if growth in the region was actually profitable or if there is are region with larger problems.
Our findings would influence our assessment of management and the position of the company.
Unfortunately I need to go now and will be back in a couple of hours.