Carvana (CVNA) stock soared out of the gate Thursday after the used car retailer beat top- and bottom-line expectations for its third quarter and gave an encouraging fourth-quarter forecast.
In the three months ended September 30, Carvana's revenue increased 32% year over year to $3.7 billion, driven by a 34% jump in retail units sold to 108,651. The company also said its gross profit per unit rose 20.2% to $7,685.
Meanwhile, its earnings per share (EPS) fell 82.2% from the year-ago period to 64 cents. The sharp drop in earnings compared to the year prior is a result of its Q3 2023 profit getting a boost from "a gain on debt reduction."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The third quarter was another exceptional quarter for Carvana. We had record performance in virtually every key financial measure," said Carvana CEO Ernie Garcia in a statement. "Most importantly, our customer experiences, our financial performance, and our pace of growth continue to separate us further from the pack in our industry. Today, we are the most profitable and fastest-growing automotive retailer and there is still much more to do."
The results handily beat analysts' expectations. Wall Street was anticipating revenue of $3.45 billion and earnings of 25 cents per share, according to CNBC.
For the fourth quarter, Carvana said it expects to achieve a sequential increase in its year-over-year growth rate in retail units sold. For the full year, it expects to achieve adjusted EBITDA "significantly above" the high end of its previously forecasted range of $1 billion to $1.2 billion for the full year. EBITDA is short for earnings before interest, taxes, depreciation and amortization.
"Our results through Q3 position us well for a strong finish to 2024," Carvana said.
Is Carvana a buy, sell or hold?
Even though Carvana has more than quadrupled for the year to date, most of Wall Street is on the sidelines when it comes to the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for CVNA is $220.35, representing a discount to current levels. Additionally, the consensus recommendation is Hold.
But there are bulls to be found. Financial services firm Needham, for one, has a Buy rating on the large-cap stock and raised its price target to $300 from $200 after earnings.
"CVNA is leading the onslaught against traditional car retailing in the U.S. by leveraging a digitally native, data-centric, capital-efficient, verticalized approach that we believe is a more compelling buying experience and should lead to significant value creation over the next several years," says Needham analyst Chris Pierce.
The analyst adds that Carvana's differentiated offering positions it "as a winner over a longer term time horizon," with the stock poised to "show durable share gains given a better consumer offering and industry fragmentation."
Related Content
-
Meta Stock Slips as Facebook Parent Ramps Up AI SpendingMeta stock is lower Thursday as concerns over the social media giant's increased spending offset a third-quarter earnings and revenue beat. Here's what you need to know.
-
IRS Expands Tax Breaks for Breast Cancer Screenings, ContraceptivesHealthcare Now you can get a tax deduction or reimbursement for certain medical expenses, like over-the-counter birth control and condoms.
-
Meta Stock Slips as Facebook Parent Ramps Up AI Spending
Meta stock is lower Thursday as concerns over the social media giant's increased spending offset a third-quarter earnings and revenue beat. Here's what you need to know.
-
Are Election Jitters Shaking Up Your Investing Strategy?Many investors are retreating to safer investments until after the election, but doing so could result in missed opportunities. Here's what to do instead.
-
Don't Wait to Lock In High Estate and Gift Tax ExemptionsOne of the most sweeping changes to U.S. tax code in modern history could be on the horizon. Now is the time to maximize the legacy you leave your loved ones.
-
Six Steps to Plan Your Charitable GivingIf you have money to give to causes you care about, a planned giving strategy can help boost the impact of your donations. Consider these steps to get started.
-
Stock Market Today: Stocks Slide as Solid GDP and Softer Inflation Vex Rate Cut BetsEncouraging economic news damped hopes for accelerated rate cuts.
-
Advanced Micro Devices Stock Sinks as Q4 Guidance Disappoints. What to KnowAdvanced Micro Devices is one of the worst S&P 500 stocks Wednesday after the chipmaker's Q4 outlook left Wall Street wanting more.
-
Why Reddit Stock's an Even Bigger Buy After EarningsReddit stock is soaring Wednesday after the social media firm's blowout earnings report and upbeat guidance and analysts are rushing to raise price targets.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
