Atlanta, Georgia – Carvana, the online used-vehicle retailer based in Atlanta, provided a robust earnings forecast for the current quarter, attributing it to the strength in the used-car business. Following this news, Carvana stock surged above a key buy point on Friday.
Although Carvana’s fourth-quarter report was described as “fundamentally mixed” by analyst Brad Erickson of RBC Capital Markets, the company’s outlook for the first quarter exceeded expectations, particularly in EBITDA. Despite missing targets in units sold, revenue, and EBITDA during Q4, the strong guidance for Q1 drove significant interest in Carvana’s stock.
The recent surge in Carvana’s stock price has been partly attributed to a short squeeze, illustrating the volatility in the market. In contrast, rivals in the online used-car industry, Copart and ACV Auctions, experienced differing outcomes after their earnings reports.
While Copart reported an earnings miss after Thursday’s closing bell, ACV Auctions posted a narrower-than-expected loss early on Thursday. Carvana, on the other hand, experienced a 15% decrease in revenue and a 13% drop in retail unit sales during Q4. However, the company did manage to increase its gross profit per unit to $5,283.
Looking ahead to 2024, Carvana anticipates growth in retail unit sales and adjusted EBITDA. The company’s positive outlook includes adjusted EBITDA projections significantly exceeding $100 million for the current quarter, signaling further growth potential.
CEO Ernie Garcia expressed confidence in the company’s performance, stating, “We are seeing strength throughout the business.” The market responded positively to Carvana’s earnings, with shares surging nearly 37% on Friday and surpassing a key buy point.
Overall, Carvana’s journey from a low stock price in 2022 to triple-digit gains in 2023 reflects its disruptive impact on the auto industry. The company’s strategic cost-cutting measures and debt restructuring have positioned it for continued growth and success in the market.
In contrast, Copart narrowly missed earnings and revenue expectations for its fiscal second quarter, while ACV Auctions delivered a better-than-feared loss in Q4. Each company’s performance in the online vehicle auction industry is closely monitored as they navigate the evolving market landscape.
As investors continue to assess the performance of key players in the automotive retail sector, the industry remains dynamic and competitive, with market fluctuations influencing stock prices and investor sentiment.