Carvana's Cash Flow Performance: A Closer Look at 2024 and 2025

Carvana's primary sources of operating cash flows are retail vehicle sales, wholesale vehicles, originated loans, and complementary products. The company generated $918 million in cash from operating activities in 2024, a $115 million year-over-year increase. Carvana's operating performance strengthened in 2024 due to higher unit sales and record annual revenues, leading to significant profitability milestones. The used car retailer is expected to continue driving its operating cash flow with expected improvement in its operating performance.

Carvana's (CVNA) primary sources of operating cash flows in 2024 were derived from the sale of retail vehicles, wholesale vehicles, originated loans, and complementary products. The company generated $918 million in cash from operating activities in 2024, marking a $115 million year-over-year increase. This significant improvement was largely driven by enhanced operating performance and a $274 million reduction in interest paid, attributed to higher paid-in-kind (PIK) interest on the Senior Secured Notes [1].

In 2024, Carvana's operating performance strengthened due to higher unit sales and record annual revenues, leading to substantial profitability milestones. The used car retailer reported an all-time high net income, adjusted EBITDA, and GAAP operating income. Carvana anticipates sequential growth in both retail units sold and adjusted EBITDA in the second quarter, projecting new all-time company records for both measures [1].

In addition to operating cash flows, Carvana generates cash through financing activities, including short-term revolving inventory and finance receivable facilities, real estate and equipment financing, debt issuances, and equity offerings. These financing activities have historically supported the company’s growth, market expansion, and strategic initiatives, and this trend is expected to continue [1].

Carvana's operating cash flow performance in 2024 was robust compared to its competitors. Group 1 Automotive, Inc. (GPI) reported a $396.1 million increase in net cash provided by operating activities compared to the prior year, but on an adjusted basis, its operating cash flow declined by $36.9 million due to a $103.5 million drop in net income and a $440.1 million reduction in floorplan notes payable [1]. Lithia Motors, Inc. (LAD) reported a $897.5 million year-over-year rise in operating cash flow in 2024, driven by its maturing financing receivables portfolio and lower inventory levels at more established locations [1].

Carvana's price performance and valuation metrics also reflect its strong operating performance. Carvana has outperformed the Zacks Internet – Commerce industry year to date, with shares surging 65.4% compared to the industry’s growth of 11.4% [1]. From a valuation perspective, Carvana appears overvalued, trading at a forward sales multiple of 3.46, higher than its industry’s 2.17 [1]. The Zacks Consensus Estimate for 2025 and 2026 EPS has moved up 5 cents and 8 cents, respectively, in the past seven days [1].

Analysts expect Carvana to report strong revenue and profit growth for the second quarter of 2025, signaling continued interest in used cars. Revenue is projected to climb over 34% to $4.59 billion, while adjusted profit is expected to surge nearly 200% to $1.14 per share [2]. Carvana has worked to restructure its balance sheet and improve cost efficiencies, allowing it to deliver sustained profitability [2].

Carvana's Chairman, Ernest C. Garcia II, has been selling his shares at a rapid pace, including an over $50 million sale this month. This selling activity, along with a bearish retail sentiment on Stocktwits, suggests some market caution ahead of the company's earnings report [2].

In conclusion, Carvana's operating cash flow performance in 2024 was impressive, driven by higher unit sales, record annual revenues, and strategic cost efficiencies. The company's strong performance is expected to continue, supported by anticipated growth in retail units sold and adjusted EBITDA. However, investors should remain vigilant about valuation metrics and market sentiment.

References:
[1] https://www.nasdaq.com/articles/will-carvana-continue-build-its-cash-flow-strength-2025
[2] https://stocktwits.com/news-articles/markets/equity/carvana-set-up-for-strong-q2-analysts-say-as-used-car-sales-boom-in-trump-tariff-era/cho9phbR5UL