PHOENIX - Carvana Co. (NYSE: NYSE:CVNA) shares surged over 13% following the announcement of its second-quarter earnings, which exceeded analysts' expectations.
The company reported an adjusted EPS of $0.14, notably higher than the anticipated -$0.06. Revenue for the quarter was also robust at $3.41 billion, surpassing the consensus estimate of $3.25 billion and marking a 15% increase compared to the same quarter last year.
The online auto retailer's performance was underscored by significant growth in retail unit sales, which saw a 33% year-over-year (YoY) increase. Carvana's Founder and CEO, Ernie Garcia, attributed the success to the company's unique customer offering and business model, which have propelled it to set new profitability benchmarks.
The company achieved a net income margin of 1.4% and a record adjusted EBITDA margin of 10.4%, the highest among public automotive retailers.
Investors' positive reaction, as indicated by the stock's double-digit percentage climb, was driven by the earnings beat. Carvana also highlighted other financial milestones, including a net income of $48 million and a record GAAP operating income of $259 million.
For the upcoming quarter, Carvana anticipates a sequential increase in retail units sold. The company also provided an optimistic full-year guidance for 2024, projecting adjusted EBITDA to be between $1.0 billion and $1.2 billion, a significant leap from last year's $339 million.
Garcia expressed pride in the team's achievements and optimism for the future, stating, "We couldn't be prouder of our team and remain just as ambitious looking forward as we tackle the many opportunities to make our business and customer offering even better as we drive toward buying and selling millions of cars per year."
The midpoint of Carvana's full-year adjusted EBITDA guidance stands at $1.1 billion, which represents an aggressive target that would mark substantial growth from the previous year.
Following the report's release, analysts at Wells Fargo (NYSE:WFC) raised their rating on CVNA stock from Equal Weight to Overweight, noting a long-term opportunity that is "too hard to ignore."
"Despite lingering macro concerns and choppy category dynamics, CVNA fundamentals are clearly improving, and we see a LT opportunity too hard to ignore."
Separately, BTIG analysts maintained a Buy rating on the stock and raised their price target from $155 to $188.
"In our initiation last month we described CVNA as "heavenly positioned" and our conviction remains firmly intact. The combination of industry-leading profitability and growth is rare and puts CVNA at a distinct advantage in a massive, $1T TAM."
Meanwhile, Morgan Stanley (NYSE:MS) analysts reiterated an Underweight rating on CVNA shares but lifted their price target from $75 to $110.
"CVNA deserves a ton of credit for righting the ship and demonstrating strong operating leverage as the company returns to growth," they commented.
"While our $220 bull case offers room for further upside, our $110 base case does not get us close enough to the current share price to move us from Underweight, particularly given adjacent signs of consumer fatigue within the US auto and auto credit complex."
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