Home Mutual Funds Fallen Pandemic Star Carvana Roars Back into Gains With Bullish Outlook, Q1 Beat

Fallen Pandemic Star Carvana Roars Back into Gains With Bullish Outlook, Q1 Beat

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Key Takeaways

  • Carvana set profit and sales records in the first quarter and projected second-quarter retail unit growth and shares skyrocketed.
  • The online used car retailer also posted an all-time high in gross profit per unit sold, and slashed expenses.
  • Wedbush raised its price target on the stock to $120 from $80 each, pointing to the first quarter results and guidance.

Shares of Carvana (CVNA) skyrocketed after the online used car retailer issued an upbeat outlook for the current quarter and had its best financial results ever as it made more money per sale and cut costs.

The company said it was expecting a sequential increase in the growth rate in retail units in the second quarter and reported a record first quarter profit of $49 million after posting a $286 million loss a year ago. The quarter’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $235 million and revenue of $3.06 billion were also record highs.

Both adjusted earnings per share of $0.23 and revenue came in above expectations. It also said it expects a sequential increase in EBITDA in the second quarter.

Carvana’s gross profit per unit (GPU) soared 49.5% to $6,432, an all-time high as well. Selling, general, and administrative expenses (SG&A) per unit declined 14.0% to $4,963.

CEO Ernie Garcia said the performance validated “our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences.” He added that the company’s business model, financial model, and customer offerings “are stronger than ever, and we are now in the long-term phase of driving profitable growth.”

In a note to clients, Wedbush raised its price target on Carvana to $120 from $80. It noted that the company’s guidance for current quarter and year-over-year unit EBITDA showed sequential improvement from the record first quarter, “driving optimism of sustainable profitable growth.”

Carvana boomed during the pandemic as more people, stuck at home, bought used cars online, then struggled, but Thursday’s results show its turnaround is working.

Its volatile stock is up 38% at $121.18 each as of about 11:00 a.m. ET and is up more than 1,000% in the past year.


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