Carvana stock (NYSE:CVNA) experienced a significant increase of up to 12% on Friday following an unexpected positive earnings report from the online used car platform, despite a decrease in the number of units sold compared to the previous year.
The Tempe, Arizona-based company reported adjusted earnings of $3.60 per share, which surpassed expectations for a loss of $0.78. Additionally, Carvana’s revenue of $2.77 billion met expectations. Notably, the company’s total gross profit per unit (GPU) saw a remarkable 70% year-over-year increase, reaching a record high of $5,952.
Despite the impressive performance, analysts at DA Davidson maintained a Neutral rating on the stock and lowered their price target from $60 to $35. This adjustment was attributed to lower unit sales compared to the previous year.
In the quarter, Carvana sold a total of 80,987 units, representing a 6% increase from the previous quarter but a 21% decline year over year. Carvana anticipates a drop in retail units sold, primarily influenced by industry trends and seasonal patterns.
During the company’s earnings call, CEO Ernie Garcia mentioned, “I do think over the last four weeks and given all the data sources that we have… it looks like things have probably been a bit softer.” He also acknowledged the challenges in determining seasonality, given the changes in the used vehicle market in 2021 and the impact of rising interest rates last year.
Carvana has actively prioritized achieving profitability in the short term at the expense of growth. In response to cost-cutting efforts and cash preservation, the company, which was once a favorite during the pandemic, laid off workers in the previous year. Carvana’s stock price hit a 52-week low of $3.55 in December 2022 amid bankruptcy speculation.
The stock has attracted attention from short sellers, with the stock’s value having surged by over 1,000% in the first half of the year, reaching over $50 per share and resulting in substantial losses for short sellers amounting to $2 billion.
As of now, the stock has received 1 Buy rating, 17 Hold ratings, and 5 Sell ratings from analysts.
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