Carvana (NYSE:CVNA) crushed Street’s Q1 estimates. The company delivered strong numbers on the profitability front. Moreover, management provided upbeat Q2 guidance. These positives lifted investors’ sentiment, leading to a 32.5% rally in its stock in Wednesday’s after-hours trading.
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The leadership of this e-commerce platform for buying and selling used cars termed the first quarter financial results as the best in the company’s history. Furthermore, management expects a sequential increase in both the year-over-year growth rate of retail units and adjusted EBITDA in Q2, indicating that the current momentum is expected to continue.
With this background, let’s delve into CVNA’s Q1 financial performance.
Carvana Beats Estimates by a Wide Margin
Carvana sold 91,878 retail units in Q1, up 16% year over year. This boosted its top line, which increased 17% year-over-year to $3.06 billion and exceeded analysts’ estimates of $2.67 billion.
On the profitability metrics, CVNA delivered a record adjusted EBITDA of $235 million compared to a loss of $24 million in Q1 of 2023. Moreover, it reported a solid adjusted EBITDA margin of 7.7%. In addition, the total gross profit per unit (GPU) was $6,802, up by an impressive $2,006 year-over-year.
Thanks to higher sales and an improved GPU, Carvana delivered earnings of $0.23 per share in Q1, compared to a loss of $1.51 per share in the prior-year quarter. Moreover, this compares favorably with the analysts’ estimate of a loss of $0.67 per share.
Outlook
For 2024, management expects a year-over-year improvement in retail units sold and adjusted EBITDA.
Additionally, with the company’s business becoming more profitable, its adjusted EBITDA significantly surpasses capital expenditures and interest expenses. As a result, CVNA intends to make cash interest payments on its 2028 and 2030 Senior Secured Notes for both semiannual payment dates in 2025.
What is the Future of CVNA Stock?
CVNA stock has rallied over 1,106% in one year. Given this massive gain in its share price, Wall Street analysts are sidelined on Carvana, implying that the positives are already priced in.
With 2 Buys, 12 Holds, and one Sell recommendation, CVNA stock has a Hold consensus rating on TipRanks. Analysts’ average price target for CVNA stock is $69.27, implying 20.46% downside potential from current levels.
