Carvana (CVNA) stock popped more than 10% Thursday after the used car retailer reported a surprise profit for its second quarter and topped revenue expectations.
In the three months ended June 30, Carvana's revenue increased 14.9% year-over-year to $3.4 billion, driven by a 32.5% year-over-year increase in retail units sold to 101,400. Its earnings per share swung to 14 cents from a per-share loss of 55 cents in the year-ago period.
"Carvana's second quarter results clearly demonstrate the differentiated strength of our customer offering and business model," said Carvana CEO Ernie Garcia in a statement. In addition to leading the industry in retail unit growth, CVNA's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin set "an all-time high water mark for public automotive retailers," he added.
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The results handily easily analysts' expectations. Wall Street was anticipating revenue of $3.2 billion and a loss of 7 cents per share, according to CNBC.
For the rest of the year, Carvana said it anticipates "a sequential increase in retail units in Q3 compared to Q2" and "adjusted EBITDA of $1.0 to $1.2 billion for the full year 2024, an increase from $339 million last year."
Is Carvana stock a buy, sell or hold?
It wasn't even two years ago that Carvana appeared to be on the brink of bankruptcy. But in 2024, the consumer discretionary stock has been one of the best performers on the price charts, up more than 200%.
Analysts have had a tough time keeping up with CVNA's quick ascent. According to S&P Global Market Intelligence, the average analyst target price for CVNA stock is $125, which is about 20% below current levels. Additionally, the consensus recommendation is Hold.
Still, there are some on Wall Street that have taken note of the sizzling stock. Financial services firm Needham has a Buy rating on Carvana and lifted its price target on the stock to $200 from $160 after earnings.
"CVNA is proving out the original bull thesis on the stock, with their unique industry positioning and physical and technology moats set to drive a long runway of share gains, while leveraging improved internal processes to drive industry leading gross profits per unit," Needham analyst Chris Pierce said in a note this morning. "The next leg of CVNA's growth is profitable unit growth, with commentary on the path forward in retail GPU also indicative of a stronger tilt towards a unit growth posture."
Needham's $200 price target represents implied upside of nearly 40% to current levels.
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