Carvana (CVNA) exceeded expectations for earnings and revenue in the third quarter, while a key metric continued to grow. Carvana stock saw a significant boost in after-hours trading.
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Carvana Earnings
Estimates: Analysts, on average, project that Carvana will reduce its net loss per share to 70 cents from $2.67 a year ago, according to FactSet. Revenue is expected to decrease by 17% year over year, to $2.807 billion.
This would make it the fifth consecutive quarter of revenue declines. The online used-car seller last reported actual earnings per share in Q2 2021, according to FactSet data.
Other metrics to watch are the wholesale and retail units sold during the quarter, as well as the gross profit per unit (GPU), a closely monitored measure. Carvana previously projected a Q3 GPU above $5,000.
Analysts anticipate the first sequential increase in used vehicles sold at retail since Q2 2022. FactSet indicates a projection of 77,474 retail unit sales in Q3.
Results: Net loss of 55 cents per share. Revenue came in at $3.386 billion.
The company reported retail unit sales of 80,987 and a GPU of $5,952.
“For the second consecutive quarter, we delivered GPUs that far exceed our 2021 high water marks,” said CEO Ernie Garcia in an earnings release.
Outlook: For the current fourth quarter, Carvana projects:
- A sequential decline in retail units sold, primarily driven by industry and seasonal patterns
- GPU above $5,000 for the third consecutive quarter
- Positive adjusted EBITDA for the third consecutive quarter
For the full year, analysts expect Carvana to have a loss of $3.41 per share, a significant improvement from a loss of $15.74 in 2022, according to FactSet.
Carvana Stock
Shares of Carvana surged nearly 9% in after-hours trading on Thursday. CVNA stock rose 15.2% to 29.94 during regular trading hours today. Carvana stock experienced a rally on Thursday after approaching the 200-day moving average, as shown on the MarketSmith chart.
During a broad market decline, CVNA stock failed to break out in September, with shares selling off over several weeks. There is currently no new buy point.
Brick-and-mortar competitor CarMax (KMX) saw a 2.8% increase on Thursday and is currently below key support levels.
Used-Car Prices Falling
In October, Morgan Stanley analysts stated that car dealers, including Carvana and CarMax, are exposed to a decline in new and used vehicle prices, which would impact their gross profit margins.
The Manheim Used Vehicle Value Index, which tracks wholesale prices, saw a 3% decrease in the first half of October.
In September, Carvana completed a debt exchange offer with participation from 96% of noteholders. In July, it announced a deal to reduce its debt by $1.2 billion in order to promote 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 disrupted the auto industry by selling used cars online and is famous for its car vending machines.
The company experienced rapid growth during the pandemic’s used-car boom. However, when consumers began tightening their belts, Carvana found itself with an excess of cars for which it had paid too much.
After a collapse in 2022, Carvana stock has surged 525% year to date, driven by improving business trends and the possibility of a short squeeze.
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