PHOENIX – Carvana The shares of Co. (NYSE: NYSE:) rose more than 13% after reporting second-quarter earnings, exceeding analyst expectations.
The company reported adjusted earnings per share of $0.14, significantly higher than the -$0.06 expected. Revenue for the quarter was also robust at $3.41 billion, surpassing the consensus estimate of $3.25 billion and marking a 15% increase compared to the same quarter last year.
The online car retailer’s performance was underlined by significant growth in retail unit sales, which rose 33% year-on-year. Carvana founder and CEO Ernie Garcia attributed the success to the company’s unique customer offering and business model, which has pushed the company to set new benchmarks for profitability.
The company achieved a net profit margin of 1.4% and a record adjusted EBITDA margin of 10.4%, the highest among public auto retailers.
The positive response from investors, as evidenced by the stock’s double-digit percentage gain, was driven by the profit margin. Carvana also highlighted other financial milestones, including net income of $48 million and record GAAP operating income of $259 million.
For the coming quarter, Carvana expects a consecutive increase in the number of retail units sold. The company also provided optimistic full-year guidance for 2024, calling for adjusted EBITDA to be in the range of $1.0 billion to $1.2 billion, a significant jump from last year’s $339 million.
Garcia expressed his pride in the team’s achievements and was optimistic about the future, saying: “We couldn’t be more proud of our team and continue to look just as ambitiously to the future as we take advantage of the many opportunities to grow our business and customer offering even better as we drive toward buying and selling millions of cars every year.”
The midpoint of Carvana’s full-year adjusted EBITDA guidance is $1.1 billion, which represents an aggressive target that would represent substantial growth from the prior year.
Following the report’s release, Wells Fargo analysts upgraded their rating on CVNA stock from Equal Weight to Overweight, noting a long-term opportunity that is “too hard to ignore.”
“Despite ongoing macro concerns and choppy category dynamics, CVNA fundamentals are clearly improving, and we see an LT opportunity that is too difficult to ignore.”
In addition, BTIG analysts maintained a buy rating on the stock and increased their price target from $155 to $188.
“At our launch last month, we described CVNA as ‘heavenly positioned’ and our belief remains as strong as ever. The combination of industry-leading profitability and growth is rare and gives CVNA a clear advantage in a massive $1 billion TAM.”
Meanwhile, Morgan Stanley analysts reiterated that they were underweight CVNA stock but raised their price target to $110 from $75.
“CVNA deserves much credit for righting the ship and demonstrating strong operational impact as the company returns to growth,” they noted.
“While our $220 bull scenario leaves room for further upside, our $110 base case does not put us close enough to the current share price to move us out of an underweight position, especially given signs of consumer fatigue within the US automotive and car credit complex.”
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