Carvana gave robust outlook late Wednesday after crushing earnings estimates for the second quarter. Carvana stock soared to a high on Thursday after a massive rally in the past year.
Brick-and-mortar rival CarMax extended gains on Wednesday after breaking out on Tuesday. AutoNation surged to a record high Wednesday after its earnings report.
Along with stronger-than-expected Carvana earnings, the online used-car seller showed progress on key profitability metrics, including what one analyst called its "industry-leading" margins.
Carvana Earnings
Estimates: Analysts expected Carvana to deliver a net loss of $7.3 million, according to FactSet. That would compare with a net loss of a $105 million a year ago and net income of $49 million the prior quarter.
They projected adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $253.8 million, rising both year over year and quarter over quarter.
Revenue was seen rebounding 10%, year over year, to $3.259 billion.
Results: Late Wednesday, Carvana reported net income of $48 million for the second quarter, defying views for a net loss. The company posted adjusted EBITDA of $355 million, also well ahead of views.
Revenue surged 15% to $3.41 billion, easily beating. Carvana said it sold 101,440 used cars to retail buyers over the quarter, a 33% increase vs. a year ago and accelerating from a 16% gain in Q1.
Carvana reported adjusted EBITDA margin of 10.4%, "a new best for public automotive retailers," the company said. That margin swelled from 7.7% in Q1.
Outlook: Late Wednesday, Carvana guided an increase in retail units in the current third quarter vs. Q2. Further, it guided record adjusted EBITDA of $1 billion to $1.2 billion for the full year, an increase from $339 million last year.
That would be above analysts' expectations for full-year adjusted EBITDA of $905.5 million, per FactSet.
Carvana Stock, AutoNation, CarMax Strong
Shares of Carvana popped 5.1% to 149.85 in big volume on Wednesday. On the stock market today, shares surged another 10%, hitting a 52-week high intraday.
Carvana stock is now extended from a 129 buy point, meaning shares are not in buy range. The auto retail stock first cleared that cup-shaped entry on June 25.
So far this year, Carvana stock has more than doubled, vaulting 157%. The auto retail stock nearly tripled in the past year, earning it a best-possible 99 RS Rating from IBD.
CarMax stock gained 0.1% on Wednesday. Shares rose in the buy zone after clearing an 84.26 cup-with-handle entry on Tuesday.
AutoNation stock rocketed 6.3% to 190.72 on Wednesday, hitting a record high intraday. Shares raced beyond the 5% buy zone from a 178.13 buy point, initially cleared on July 12.
On Wednesday, AutoNation delivered a sharper-than-expected 37% earnings decline. It blamed the CDK Global cyberattack on dealerships. "An otherwise strong quarter for AutoNation was masked by the CDK outage," CEO Mike Manley said in a statement. He called the trend in vehicle margins encouraging.
What To Watch: Industry-Leading Margins And More
The Carvana earnings report follows a sharp swing to profitability in the first quarter. The trend in margins, market share, retail units sold and gross profit per unit are all under watch for Q2.
On July 19, analysts at JPMorgan raised their price target on Carvana stock by $5 to 155. The analysts said Carvana continues to "buck the trend" on market share and margins, according to TheFly.com.
In Q1, Carvana posted a 7.7% adjusted EBITDA margin, "higher than all U.S. publicly traded automotive retailers," the company said. It sold 91,878 used cars to retail buyers during that quarter, a 16% increase.
On July 12, analysts at BTIG initiated coverage of Carvana stock with a buy rating and 155 price target. They cited "industry-leading" EBITDA margins despite its 1% share of the total used-car market and 6% share of the smaller "but still huge" digital market for used cars.
Founded in 2012, Carvana disrupted the auto retail industry by taking used-car sales online.
Carvana stock plunged in 2022 but surged by triple digits in 2023. A crash in used-auto prices after the coronavirus pandemic left Carvana sitting on a heavy inventory of comparatively expensive vehicles. But then the company slashed costs and restructured debt, easing bankruptcy worries.
Compared with Carvana, both AutoNation stock and CarMax made modest progress in the past year.
