Carvana (CVNA) exceeded earnings expectations for the third quarter on Thursday, with a significant increase in a key metric. Carvana stock soared during after-hours trading.
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Impressive Carvana Earnings Results
Estimates: Analysts estimated a net loss per share of 70 cents for Carvana, compared to $2.67 per share in the previous year, according to FactSet. They projected a 17% year-over-year decrease in revenue to $2.807 billion.
FactSet data shows that analysts expected 77,474 retail unit sales, marking the first quarter-over-quarter increase since Q2 2022.
Analysts also predicted a gross profit per unit (GPU) of $5,685, which is a closely monitored metric for Carvana.
Results: Carvana reported earnings of $3.60 per share, surpassing expectations for a loss. However, the company’s revenue came in at $2.773 billion, down 18% and below projections.
In Q3 2023, Carvana sold 80,987 retail units, exceeding analyst expectations but representing a 21% decrease compared to the previous year.
The Q3 GPU for Carvana was $5,952, a 70% increase from the previous year. On a non-GAAP basis, the Q3 GPU was $6,396, a 65% increase from the previous year.
“For the second consecutive quarter, we delivered GPUs that far exceed our 2021 high water marks,” commented CEO Ernie Garcia in an earnings release.
Outlook: Carvana’s guidance for the fourth quarter includes a sequential decline in retail units sold, a GPU above $5,000 for the third consecutive quarter, and positive adjusted EBITDA for the third consecutive quarter.
- A sequential decline in retail units sold
- GPU above $5,000 for the third consecutive quarter
- Positive adjusted EBITDA for the third consecutive quarter
Prior to the release of the Q3 earnings, analysts anticipated a full-year loss of $3.41 per share for Carvana, a significant improvement from a loss of $15.74 per share in 2022, according to FactSet.
Carvana Stock Performance
Following the strong earnings report, Carvana’s stock price rose 5.6% in late Thursday trade. On the stock market today, CVNA stock surged 15.2% to reach $29.94. The MarketSmith chart indicates that Carvana stock rebounded from just above the 200-day moving average.
While CVNA stock experienced a failed breakout attempt in September amid a broader market decline, with shares declining over several weeks, there is currently no new buy point. Rival brick-and-mortar company CarMax (KMX) gained 2.8% on Thursday but remains below key support levels.
Decliing Used-Car Prices
In October, Morgan Stanley analysts warned that car dealers like Carvana and CarMax may face a decline in the pricing of new and used vehicles, which could impact their gross profit margins.
The Manheim Used Vehicle Value Index, which tracks wholesale prices, fell 3% in the first half of October.
In September, Carvana successfully completed a debt exchange offer with 96% participation from noteholders. The company had previously announced a deal in July to reduce its debt by $1.2 billion in order to support growth and profitability.
In August, Carvana raised its Q3 earnings guidance, citing “fundamental progress in key business drivers and momentum early in the quarter.”
Founded in 2012, Carvana revolutionized the auto industry by introducing online sales of used cars and gaining recognition for its car vending machines.
The company experienced rapid growth during the pandemic-driven used-car boom. However, when consumers began to tighten their budgets, Carvana found itself with an excess inventory of cars for which it had paid too much.
After a decline in 2022, Carvana stock has skyrocketed 525% year-to-date, driven by improving business trends and the potential for a short squeeze.
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