Carvana Shares Spike 35% on Earnings Beat First Quarter Results

Carvana ( CVNA ) stock Skyrocketed more than 30% during Thursday's market open after the used car retailer reported record results and turned a profit during the first quarter.

Company's Performance
Earnings per share: 23 cents — it was not immediately clear if it was comparable to the loss of 74 cents expected.
Revenue: $3.06 billion reported Vs. $2.67 billion expected

Carvana ( CVNA ) reported record first-quarter net income of $49 million, compared to a $286 million loss during the prior-year period. Carvana ( CVNA ) also posted an all-time-best adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, of $235 million, up from a $24 million loss a year earlier.

Carvana's ( CVNA ) gross profit per unit, or GPU, which is closely watched by investors, was $6,432. Carvana’s adjusted EBITDA profit margin for the quarter was 7.7%.

Carvana’s net income included a roughly $75 million gain in the fair value of Carvana’s warrants to acquire Root Inc. common stock. This did not impact its GPU or adjusted EBITDA.

“In Q1, we delivered our best results in company history, validating our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences,” Carvana CEO and Chairman Ernie Garcia III said in a release.

He reiterated that the company’s performance was driven by efficiency gains in its operations, especially the reconditioning of vehicles for sale as well as selling, general, and administrative expenses, among other areas.

Carvana ( CVNA ) expects to continue to grow its adjusted EBITDA profit margin further as the company continues to grow, according to Garcia. He declined to disclose how high the company believes it can grow those results.

The company anticipates further cost reductions or efficiency gains to increase profitability through areas such as advertising as well as overhead and operational expenses.

Garcia said Carvana ( CVNA ) is working on increasing vehicle reconditioning and profitably rebuilding its vehicle inventory, which was nearing an all-time monthly low of 13 days’ supply in March. It has increased its reconditioning capacity of vehicles to prepare for sale by roughly 60% during the past year.

he told CNBC that “Acquiring inventories, generally speaking, feel relatively straightforward to scale, but growing the recondition capacity is difficult,”. “Inventory today is certainly tighter than we would like for it to be. We’re working hard to build it back up, but we’re extremely well-positioned to do it.”

Over the past two years, the results follow a major restructuring by the company to focus on profitability rather than growth, after bankruptcy concerns when Carvana’s stock lost nearly all of its value in 2022.

Carvana ( CVNA ) Shares have recovered since then. They had climbed roughly 67% year to date before the company reported its first-quarter results. The stock closed Wednesday up about 5% at $87.09 per share.

For Q2, Carvana ( CVNA ) said it expects a sequential increase in its year-over-year growth rate in retail units, and a sequential increase in adjusted earnings before interest, taxes, depreciation, and amortization.

Technical Outlook
Carvana ( CVNA ) stock is trading within the overbought region with a Relative Strength Index (RSI) of 82.10 posing a threat of a trend reversal in the near term. Furthermore, the stock indicates a breakaway gap which occurs when the price gaps above a support or resistance area due to a news or fundamental.