Carvana’s Stock Picks Up Speed After a Record-Breaking Quarter
Once written off as a junkyard-bound business model, CarvanaCVNA has engineered a remarkable comeback tour. The online used car seller recently posted a first-quarter performance that blew past expectations — showcasing a 46% year-over-year sales increase that left Wall Street’s forecasts in the dust. It’s the fifth straight quarter of positive net income for a retailer that fought off bankruptcy fears in 2022 and faced heat from Hindenburg earlier this year.
Riding the success wave: CEO Ernie Garcia noted the firm hit “a new record for retail units while also driving record profitability and hitting our highest customer net promoter score in nearly three years.” Carvana credits its earnings surge to greater operational efficiency, rising consumer demand driven by tariff concerns, and improvements in vehicle prep that have transformed its bottom line. Additionally, faster deliveries and a growing lending segment — which brought in $273M in loan sales revenue — further boosted performance.
- Revenue climbed to $4.23B (up 38% YoY), while nearly 134K vehicles were sold — both figures substantially exceeding analyst forecasts.
- Adjusted EBITDA reached $488M with an 11.5% margin, making the business nearly twice as profitable as the average public automotive retailer, according to Garcia.
Used Cars, New Ambitions
While Carvana maintains that Trump-era tariffs aren’t expected to directly affect used car sales, the 25% tariff on new imported vehicles and parts could still impact the broader market. However, Garcia believes the policy may actually benefit them, stating, “To the extent new car prices go up… that would likely drive a substitution into used, which we expect would be positive.” He added that despite short-term “little gyrations” in demand tied to tariff concerns, the organization remains focused on its long-term trajectory. Analysts seem to agree, with many raising their ratings following the strong showing.
- Piper Sandler bumped its target to $315, calling Carvana’s growth and operating leverage “unmatched by any other stock” they cover.
- Citi also hiked its target to $325 from $280, citing strong execution and market share gains as key reasons for its optimistic outlook.
Ambitious roadmap ahead: Carvana has set a bold five-to-ten-year target of selling 3M retail units annually at a 13.5% adjusted EBITDA margin — capturing around 7.5% of the US used car market. With just a 1% share of the 40M used car transactions today, it aims to prioritize growth over margins within “reasonable ranges” while maintaining operational quality. Leadership believes that by consistently delivering standout customer experiences, they can become “the way people buy and sell cars.”CVNA’s stellar performance sent shares up 11% yesterday, bringing its year-to-date gain to 44%.