Carvana earnings show the market's verdict is in: brighter days ahead

Jay's InsightThursday, Feb 22, 2024 5:29 pm ET

1min read

Carvana Co. (CVNA) unveiled its Q4 earnings, revealing a miss on both earnings per share (EPS) and revenue targets. Despite this, the company's future looks promising with anticipated improvements in retail unit sales and adjusted EBITDA for Q1 2024 and beyond. This review delves into Carvana's Q4 achievements, its optimistic forecast, and the potential impact on CVNA stock.

Q4 saw Carvana post a $1 per share loss, falling short of the expected ($0.85) and marking a 14.6% drop in revenue year-over-year to $2.42 billion, below the anticipated $2.56 billion. The company sold 76,090 retail units, a 13% decrease. However, it reported a notable rise in gross profit per unit to $5,283, indicating robust profit margins even amid challenging conditions.

Looking forward, Carvana forecasts an uptick in retail unit sales and adjusted EBITDA for the initial quarter of 2024 and the entire year. Specifically, the company projects its adjusted EBITDA to significantly exceed $100 million in Q1, with retail unit sales expected to slightly increase from the previous year. For 2024, Carvana aims to enhance both retail unit sales and adjusted EBITDA in comparison to 2023.

CEO Ernie Garcia shared an optimistic outlook in a shareholder letter, predicting an adjusted EBITDA per unit of over $1,200 in Q1, absent any substantial one-time financial adjustments.

This optimistic forecast has energized CVNA stock, leading to a 21.1% jump in extended trading. The stock's performance is showing signs of recovery, indicating a potential buy point for investors.

Carvana's Q4 report highlights a challenging period with a dip in retail unit sales but showcases a significant profit per unit. The company's positive outlook for 2024, expecting increased sales and adjusted EBITDA, signals potential growth. This forecast has already had a positive impact on CVNA stock, suggesting Carvana might be on the verge of a turnaround, especially as the used car market is projected to improve later in the year. Investors and industry watchers will be keen to see if Carvana can maintain its profitability and stay ahead in the competitive landscape.

CVNA shares are a glaring signal this earnings season: the company missed and shares are launching higher. That's a market signal that investors can't afford to ignore.

$CVNA(CVNA)

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