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Carvana Powers Up as Q3 Earnings Outpace Expectations, Boosts 2024 Forecast

Shares of Carvana (CVNA) jumped 20% on Thursday after the online used-car retailer posted strong third-quarter earnings, beating analysts’ expectations and setting an optimistic tone for the rest of the year.

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Carvana's Q3 revenue reached $3.66 billion, slightly surpassing the anticipated $3.65 billion, while the company achieved $0.64 per share, well above the $0.30 consensus. This marked Carvana’s third consecutive profitable quarter, a critical milestone for a company that has spent much of 2023 navigating a challenging used-vehicle market and restructuring its debt.

Sustained Profitability and Revenue Growth Signal Stability
In a striking reversal from previous losses, Carvana reported an impressive adjusted EBITDA of $429 million, nearly triple the $148 million from the same quarter last year. This substantial boost highlights the effectiveness of the company’s cost-cutting measures, with operating and sales costs reduced per retail unit. The company’s revenue growth of 32% year-over-year signals resilience amid a fluctuating market and rising consumer interest in used vehicles. Carvana sold over 108,000 vehicles in Q3, a 34% increase compared to last year, reaffirming its competitive edge.

CEO Ernie Garcia hailed the quarter’s results, emphasizing Carvana’s strategic positioning as the “fastest-growing and most profitable automotive retailer.” With a mere 1% market share, the company sees ample growth potential.

2024 Guidance Uplift and Industry Impact
Looking ahead, Carvana raised its 2024 guidance, projecting adjusted EBITDA to exceed the high end of its previous range of $1 billion to $1.2 billion. The company expects retail volume to increase further in Q4 and maintain strong gross profit per unit, which hit a record $3,497 in Q3. Analysts view this guidance as a significant vote of confidence, with some predicting that Carvana's sustained performance may soon lead to a credit rating upgrade. This could allow Carvana to refinance its $5.4 billion debt, potentially reducing annual interest payments by up to 50%.

Despite the recent surge, Carvana stock remains below its all-time highs, but with a year-to-date gain of over 360%, it has outperformed traditional used car retailers like AutoNation (AN) and CarMax (KMX). Carvana’s turnaround efforts in the face of industry headwinds, including falling car prices and rising auto loan delinquencies, have earned it a cautiously optimistic outlook from investors.


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