Carvana (CVNA) stock soared out of the gate Thursday after the used car retailer beat top- and bottom-line expectations for its third quarter and gave an encouraging fourth-quarter forecast.
In the three months ended September 30, Carvana's revenue increased 32% year over year to $3.7 billion, driven by a 34% jump in retail units sold to 108,651. The company also said its gross profit per unit rose 20.2% to $7,685.
Meanwhile, its earnings per share (EPS) fell 82.2% from the year-ago period to 64 cents. The sharp drop in earnings compared to the year prior is a result of its Q3 2023 profit getting a boost from "a gain on debt reduction."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The third quarter was another exceptional quarter for Carvana. We had record performance in virtually every key financial measure," said Carvana CEO Ernie Garcia in a statement. "Most importantly, our customer experiences, our financial performance, and our pace of growth continue to separate us further from the pack in our industry. Today, we are the most profitable and fastest-growing automotive retailer and there is still much more to do."
The results handily beat analysts' expectations. Wall Street was anticipating revenue of $3.45 billion and earnings of 25 cents per share, according to CNBC.
For the fourth quarter, Carvana said it expects to achieve a sequential increase in its year-over-year growth rate in retail units sold. For the full year, it expects to achieve adjusted EBITDA "significantly above" the high end of its previously forecasted range of $1 billion to $1.2 billion for the full year. EBITDA is short for earnings before interest, taxes, depreciation and amortization.
"Our results through Q3 position us well for a strong finish to 2024," Carvana said.
Is Carvana a buy, sell or hold?
Even though Carvana has more than quadrupled for the year to date, most of Wall Street is on the sidelines when it comes to the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for CVNA is $220.35, representing a discount to current levels. Additionally, the consensus recommendation is Hold.
But there are bulls to be found. Financial services firm Needham, for one, has a Buy rating on the large-cap stock and raised its price target to $300 from $200 after earnings.
"CVNA is leading the onslaught against traditional car retailing in the U.S. by leveraging a digitally native, data-centric, capital-efficient, verticalized approach that we believe is a more compelling buying experience and should lead to significant value creation over the next several years," says Needham analyst Chris Pierce.
The analyst adds that Carvana's differentiated offering positions it "as a winner over a longer term time horizon," with the stock poised to "show durable share gains given a better consumer offering and industry fragmentation."
Related Content
-
S&P 500 Hits New High on Jobs Friday Eve: Stock Market TodayThe S&P 500 hit a new all-time closing high and most of the stocks in the Dow Jones Industrial Average were up the day before a critical jobs report.
-
New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Over Age 65Tax Changes If you’re an older adult, a new bonus tax deduction could provide a valuable tax benefit. Here's how it works.
-
S&P 500 Hits New High on Jobs Friday Eve: Stock Market Today
The S&P 500 hit a new all-time closing high and most of the stocks in the Dow Jones Industrial Average were up the day before a critical jobs report.
-
SPACs, SMRs and How to Invest in the Nuclear InsurgencyBig nuclear deployments are in process, but small modular reactors could be a better way to meet rapidly rising electric power demand.
-
10 Ways to Stay Safe From Grandparent Scams and Other Fraud, Courtesy of a Financial PlannerScams are increasingly hard to detect, and anyone can be fooled, from older people to educated professionals. Here are 10 ways to avoid becoming a victim.
-
This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding ExpertFueled by easy money, inflated tuition and high default rates, the student loan bubble mirrors the 2008 subprime mortgage crisis. We could be headed for a potential financial collapse. What can we do?
-
Big Tech Names Rise Above Broad Weakness: Stock Market TodaySome familiar names enjoyed solid rallies on the resolution of outstanding questions, but macro uncertainty hangs over the broader market.
-
Klarna IPO: Should You Buy KLAR Stock?The Klarna IPO is expected to be one of the biggest offerings of the year, with the buy-now-pay-later firm expected to start trading next week.
-
Alphabet Stock Pops After Google Antitrust Ruling: What to KnowGOOGL stock is soaring Wednesday after a judge ruled that Alphabet does not have to divest its Chrome browser.
-
7 Mistakes to Avoid When You First Start InvestingInvesting brings the opportunity to build wealth, but there are plenty of mistakes that can be made. Here are seven common ones and how they can be avoided.
