Carvana Delivers First Quarterly Profit; Shares Gain 9%

Shares of online used car retailer Carvana (CVNA) jumped 9% in Thursday’s extended trading session. The price action comes in response to the company’s impressive second-quarter results, which reflected the first-ever positive quarterly net income, driven by robust demand for used cars.

Earnings of $0.26 per share easily beat analysts’ estimates of a $0.41 per share loss. A loss of $0.62 per share was reported in the same quarter last year.

On top of this, revenues almost tripled year-over-year to $3.34 billion, exceeding consensus estimates of $2.44 billion. (See Carvana stock charts on TipRanks)

Notably, the company sold 107,815 used cars in Q2, up 96% year-over-year from 55,098 units sold in the prior-year quarter.

What’s more, total gross profit came in at $552 million, up 268%, while gross profit per unit (GPU) increased 87.8% to $5,120, compared to $2,726 in the prior-year quarter.

Based on the strong GPU recorded during the quarter, the company now forecasts total GPU of over $4,000 for full year 2021, versus the prior guidance of mid-$3,000s.

Encouragingly, Carvana CEO Ernie Garcia said, “We remain firmly on the path to changing the way people buy cars, to delivering more than 2 million cars per year, and to becoming the largest and most profitable automotive retailer.”

Following the upbeat Q2 print, Stifel Nicolaus analyst Scott Devitt increased the price target to $400 (18.7% upside potential) from $350 and reiterated a Buy rating.

Devitt stated, “Carvana is executing well in an abnormal environment for used vehicles, with robust demand from consumers, rapidly appreciating prices, and limited supply.”

The analyst added, “While operational constraints will remain a limiting factor to growth in the near-term, Carvana is well positioned for healthy unit growth in 2H:21 given increases in production capabilities (+20% quarter-over-quarter growth in average weekly vehicle production) and headcount expansion.”

From TipRanks’ Smart Score rating system, CVNA scores a 9 out of 10, indicating that the stock has strong potential to outperform market expectations.