If I found a used BMW on sale at Carvana (CVNA 0.35%), and the price had dropped from $37,000 to $2,500, I'd be really interested. I'd rather pay $2,500 for a BMW than $37,000. But that price drop is so dramatic, I'd be really suspicious, too. "What's wrong with it?" I would want to know. "How come nobody is buying this BMW for $2,500?"

Carvana's stock has undergone a similar dramatic price drop. A year ago, 100 shares of Carvana stock would have cost you $37,000. Now it's priced at $2,500. That's a decline of over 90%.

Twenty years ago, Amazon (AMZN 1.16%) stock had a similar decline. It, too, saw a fall steeper than 90%. People who bought the stock then made out like bandits. I happen to think that Carvana and Amazon have very similar business models.

So is there something wrong with Carvana and its online business? Is the company broken in some major way? Or is this sharp price decline an incredible buying opportunity? Let's dig in.

Carvana is not Amazon

Unlike Amazon, Carvana doesn't have a fantastic B2B business under its umbrella (Amazon Web Services). Nor does Carvana have an amazing subscriber business (Amazon Prime) with reliable revenue streams. I shop at Amazon about once a week. I might shop at Carvana once a decade. 

So that's a major difference between Carvana and Amazon -- Carvana is an auto retailer, first, last, and always. It doesn't have Amazon's optionality. And what it sells, cars, are high-ticket purchases.

I'm sure Carvana will have a lot of repeat business -- I bought a used BMW there last year, and Carvana has amazing customer service. But I'm hoping my car will last a decade or more. Which means I probably won't be shopping at Carvana again until 2030 or so. 

So Carvana is not as sweet an internet business as Amazon is. But that doesn't mean we should ignore the similarities, either.

Happy couple smile in the front seat of their new car they just bought.

Image source: Getty Images.

Carvana is Amazon 2.0

Carvana is top dog and first mover in using the internet to transform the auto industry. That is not a small thing -- it's a trillion-dollar opportunity. Not even the most dedicated bear says that Carvana is Pets.com. 

It amazes me when people dismiss the opportunity in internet retail. I've heard people say that AWS saved Amazon, and that the company would have been a lousy investment without it. That's a ridiculous assertion, in my opinion.

Yes, retail has small profit margins. But the revenue opportunity is so vast that it makes up for it. This is why Amazon and Walmart (WMT 0.62%) have been two of the finest stocks in the last 50 years. A company that transforms the world of retail is an awesome stock to own. And the stock market continues to underprice these stocks, giving early investors fantastic returns over time.

Why is internet retail such an obvious winner? Just to give you one example: For decades the used car industry has relied upon commissions to pay its sales force. Because of this sales structure, many salesmen have ripped off their customers in order to make more money. It's happened so many times, to so many people, that "used-car salesman" has become synonymous with scammer or rip-off artist. 

At Carvana, everything is a fixed price. You have 70,000 car-buying options, not 700. There is no salesman, no commission, none of that.

If I saw a BMW listed for $2,500 on their site, I would jump on the opportunity. Why? Because Carvana gives its customers a seven-day trial. I can drive the car for a week (up to 400 miles), and take it to my mechanic. If there's something wrong with it, I get my money back. (Stockbrokers don't give you a deal like that.)

Carvana, like Amazon, is transforming trillion-dollar markets. Short this stock at your peril.