Shares of Carvana Co. (CVNA) popped about 14% in after-hours trading yesterday after the company reported a healthy second-quarter beat. The used-car retailer posted “industry-leading” results, with Q2 revenues and earnings both showing significant year-over-year growth. Additionally, Carvana expects sequential growth in retail units sold in Q3 and issued a robust forecast for adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for FY24.
Don't Miss Our Christmas Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Carvana operates an online used-car platform where buyers and sellers come together to buy and/or sell their used automobiles. The company is the second-largest used-automotive retailer, having just a 1% market share, displaying the huge untapped market potential and scope for growth.
Insights from CVNA’s Solid Q2 Results
In Q2 FY24, Carvana’s sales jumped 15% year-over-year to $3.41 billion, easily beating the consensus of $3.26 billion. This was possible as Carvana’s 101,440 retail units sold showed a strong sequential and year-over-year growth of 10% and 33%, respectively.
Further, CVNA posted a surprise profit per share of $0.14 in the quarter, while the Street had expected a loss of $0.05 per share. In the prior year period, CVNA reported a loss of $0.55 per share.
The company attributed the profit to higher sales and improved margins. In Q2 2024, CVNA reported an adjusted EBITDA margin of 10.4%, which was “an all-time high water mark for public automotive retailers,” as noted by CEO Ernie Garcia. Also, Carvana’s net income margin stood at 1.4%.
Carvana Issues Impressive Outlook
Based on the high demand for used cars in Q2, Carvana expects a sequential rise in the retail units sold in the third quarter of 2024.
Meanwhile, for FY24, Carvana guided for adjusted EBITDA in the range of $1.0 to $1.2 billion, notably higher compared to the $339 million reported last year.
Website Traffic Hints at Growth
According to TipRanks’ Website Traffic tool, the total estimated visits to all of Carvana’s websites worldwide grew 32.81% in the year-to-date period, showing strong potential for growth ahead.
Is CVNA a Good Stock to Buy?
Currently, CVNA has a Hold consensus rating on TipRanks based on four Buys, 12 Holds, and one Sell recommendation. Importantly, all these ratings were given before Carvana’s solid Q2 print and are subject to change as analysts review their recommendations.
Moreover, the average Carvana price target of $117.20 implies 12% downside potential from current levels and could change after analysts’ reviews. Meanwhile, CVNA shares have already zoomed over 151% so far in 2024.
