Carvana (CVNA) earnings expectations for the third quarter were shattered late Thursday, while the key gauge inflated again. Carvana stock jumped in extended trading.
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Carvana profits
Estimates: Analysts, on average, expected Carvana to narrow its net loss per share to 70 cents from $2.67 a year ago, according to FactSet. Revenues saw a 17% decline year over year to $2.807 billion.
Analysts expect retail sales of 77,474 units, the first quarter-over-quarter increase since the second quarter of 2022, FactSet shows.
They expect gross profit per unit, or GPU, to be $5,685. Carvana’s GPU is a closely followed metric.
results: Carvana turned in earnings of $3.60 per share versus loss expectations. Revenue was $2.773 billion, down 18% and below views.
In the third quarter of 2023, Carvana sold 80,987 retail units, exceeding analyst expectations but down 21% year over year.
Q3 GPU was $5,952, a 70% increase over last year. On a non-GAAP basis, Q3 GPU value was $6,396, an increase of 65% compared to last year.
“For the second straight quarter, we delivered GPUs that far exceeded our high water marks for 2021,” CEO Ernie Garcia said in an earnings statement. But GPUs are down compared to Q2 2023.
ProspectsFor the current fourth quarter, Carvana was guided by the following:
- Sequential decline in retail units sold
- GPU above $5,000 for the third quarter in a row
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are positive for the third consecutive quarter
Before Thursday’s results, analysts expected Carvana to lose $3.41 per share for the full year, a sharp improvement from a loss of $15.74 in 2022, FactSet shows.
Carvana inventory
Carvana shares jumped 5.6% in late trading Thursday. CVNA stock rose 15.2% to 29.94 on the stock market today. The MarketSmith chart shows Carvana stock rebounding from just above its 200-day moving average.
Amid a broad market decline, CVNA stock failed in its breakout attempt in September, with shares selling off over several weeks. There is no new purchase point.
Brick and mortar competitor Carmax (CMX) rose 2.8% on Thursday which is below key support levels.
Low prices for used cars
In October, Morgan Stanley analysts wrote that auto dealers, including Carvana and CarMax, are vulnerable to lower prices for new and used vehicles, which could impact their gross margins.
The Mannheim Used Vehicle Value Index, which tracks wholesale prices, fell 3% in the first half of October.
In September, Carvana closed a debt swap offering with 96% of its bondholders. It announced an agreement in July to reduce its debt by $1.2 billion in an effort to achieve growth and profitability.
In August, Carvana raised its third-quarter earnings guidance, citing “fundamental progress on key business drivers and momentum early in the quarter.”
Founded in 2012, Carvana revolutionized the automotive industry by selling used cars online. It is famous for its car vending machines.
The company grew rapidly during the pandemic used car boom. Later, as consumers began to tighten their belts, Carvana found itself stuck with too many cars for which it overpaid.
After crashing in 2022, Carvana stock is up 525% year to date, amid improving business trends and a potential short squeeze.
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