Carvana Stock Soars 13% After Strong Q2 Earnings Beat; Analysts Share Insights

PHOENIX – Carvana Co. (NYSE: CVNA) experienced a significant surge in its shares, climbing over 13% after it announced its second-quarter earnings, surpassing analysts’ expectations.

The company reported an adjusted earnings per share (EPS) of $0.14, exceeding the predicted -$0.06. Revenues for the quarter reached an impressive $3.41 billion, beating the consensus estimate of $3.25 billion, and reflecting a 15% increase compared to the previous year’s same quarter.

Carvana’s strong performance was highlighted by a notable 33% year-over-year growth in retail unit sales. Founder and CEO Ernie Garcia credited this achievement to the company’s distinct customer offerings and business model, which have allowed it to set new standards for profitability.

The company achieved a net income margin of 1.4% and a record adjusted EBITDA margin of 10.4%, the highest among publicly traded automotive retailers. Investors responded positively to the earnings report, evidenced by the stock’s double-digit increase. Additionally, Carvana reported a net income of $48 million and a record GAAP operating income of $259 million.

Looking ahead, Carvana expects a sequential rise in retail units sold in the upcoming quarter. The company also provided optimistic guidance for the full year of 2024, projecting adjusted EBITDA between $1.0 billion and $1.2 billion, a significant increase from last year’s $339 million.

Garcia expressed pride in the team’s accomplishments and optimism for future opportunities, stating, "We couldn’t be prouder of our team and remain just as ambitious moving forward as we tackle the many chances to enhance our business and customer offerings while driving towards selling millions of cars each year."

The midpoint of Carvana’s adjusted EBITDA guidance for the year stands at $1.1 billion, representing a substantial growth target compared to the previous year.

In the wake of the earnings report, analysts at Wells Fargo upgraded their rating on CVNA from Equal Weight to Overweight, highlighting a long-term opportunity that is compelling. They noted that despite ongoing macroeconomic concerns and fluctuating market conditions, CVNA’s fundamentals are clearly improving.

Meanwhile, BTIG analysts maintained a Buy rating on Carvana stock and increased their price target from $155 to $188, emphasizing the company’s strong positioning and rare combination of profitability and growth in a vast market.

Conversely, analysts at Morgan Stanley reiterated an Underweight rating on the stock but raised their price target from $75 to $110. They acknowledged Carvana’s efforts to stabilize its operations and demonstrate strong growth but indicated skepticism about the stock’s value relative to the current market conditions.

In summary, while Carvana has shown marked improvement and growth potential, analysts have mixed sentiments regarding its stock performance moving forward.