Carvana (CVNA) stock experienced a considerable surge of up to 12% on Friday following the surprising announcement of its adjusted profit for the previous quarter. This positive financial result was achieved despite a decline in the number of units sold compared to the previous year.
The online used car platform, headquartered in Tempe, Arizona, reported adjusted earnings of $3.60 per share, which surpassed the estimated loss of 78 cents. The company’s revenue of $2.77 billion was in line with expectations. Notably, Carvana’s total gross profit per unit, or GPU, witnessed a remarkable 70% year-over-year increase, reaching a record high of $5,952.
DA Davison analysts maintained a Neutral rating on Carvana’s stock, but revised their price target to $35 from $60 due to lower unit sales compared to the previous year.
In the quarter, Carvana sold a total of 80,987 units, a 6% increase from the previous quarter, but a 21% decrease year-over-year. The company anticipates a decline in retail unit sales primarily influenced by industry and seasonal trends.
During the company’s earnings call on Thursday, CEO Ernie Garcia informed analysts that recent data sources indicated a softening in the market, making it challenging to determine the current seasonality factors due to the significant changes witnessed over the past couple of years, including fluctuations in used vehicle prices in 2021 and the rising interest rate environment of the previous year.
Carvana has actively pursued profitability in the near term, even at the expense of growth. The company, previously regarded as a pandemic success story, took cost-cutting measures and let go of employees last year to preserve cash. Speculation of bankruptcy resulted in a 52-week low for the stock at $3.55 in December 2022.
Short sellers have shown a particular interest in Carvana’s stock. In the first half of the year, the stock saw a jaw-dropping surge of 1000%, reaching over $50 per share, which led to a $2 billion loss for short sellers.
Currently, the analyst ratings for Carvana’s stock stand at 1 Buy, 17 Hold, and 5 Sell.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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