Why did Carvana's net profit rebound in 2023?

Carvana's net profit rebounded in 2023 due to several key factors:

1. Strategic Cost Cutting: Carvana implemented cost-cutting measures, reducing its operating expenses from $727 million in 2022 to $472 million in 2023. This focus on profitability led to a significant decrease in net losses, with the company reporting an improved net loss of $286 million in Q1 2023, compared to $506 million in the same period the previous year.
2. Inventory Management: Carvana successfully reduced its inventory levels from $1.8 billion to $1.4 billion, which helped in managing costs effectively. This reduction in inventory, combined with a strategic focus on profitability, contributed to the improvement in net profit.
3. Gross Profit Per Unit Improvement: The company boosted its non-GAAP total gross profit per unit to $4,796 in Q1 2023, marking an increase of $1,811 year-over-year. This improvement in gross profit per unit is a positive indicator of operational efficiency and profitability.
4. Positive Earnings Surprise: Carvana reported an adjusted earnings per share (EPS) of $3.60 in November 2023, surpassing estimates for a loss of $0.78. This positive earnings surprise likely contributed to the stock's surge and reinforced investor confidence in the company's financial turnaround.

In summary, Carvana's net profit rebounded in 2023 due to strategic cost cutting, effective inventory management, improvement in gross profit per unit, and a positive earnings surprise. These factors collectively contributed to the company's financial stability and profitability.