Carvana, the popular used-car seller, saw a surge in its stock price of over 30% in extended trading on Thursday. This significant increase came after the company forecasted a surprise rise in retail sales and core profit for the current quarter. The positive outlook from Carvana is believed to be a result of high interest rates, which have prompted consumers to turn to second-hand cars instead of purchasing new ones.
Carvana’s shares have experienced impressive growth this year, with a 65% increase and an astounding 11-fold rise in value last year. Currently, the company’s stock has a short interest of 27% of free float, indicating the high level of investor confidence. The surge in stock price is expected to boost Carvana’s market capitalization by about $5 billion, bringing it to a total of $17.6 billion.
Analysts had predicted a 2.6% decline in retail sales for Carvana compared to the previous year. However, the company announced that it is anticipating a sequential increase in adjusted core profit and growth rate in retail units for the second quarter. These optimistic projections surpass expectations and demonstrate Carvana’s ability to adapt to changing market conditions.
Carvana’s strong financial performance is reflected in its first-quarter results. The company reported revenue of $3.06 billion, surpassing analysts’ estimates of $2.89 billion. Additionally, Carvana achieved adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $235 million in the first quarter, surpassing expectations and exceeding capital expenditures and interest expenses. The company also reported a first-quarter profit of $49 million, outperforming analysts’ estimates of $31.2 million.
Notably, the total supply of unsold used vehicles on dealer lots across the United States increased by 9% in March compared to the same period last year. This data, provided by market research firm Cox Automotive, suggests that consumers are increasingly turning to the used car market.
In contrast to Carvana’s positive performance, its rival CarMax recently missed analysts’ estimates for fourth-quarter results and expressed uncertainty about meeting its long-term vehicle sales target. This highlights Carvana’s ability to thrive in a competitive industry and adapt to changing consumer preferences.
Carvana’s impressive growth and positive financial results reflect its success in leveraging the growing demand for used cars. The company’s unique online platform, which offers a hassle-free car buying experience, has resonated with consumers, further contributing to its success.
Overall, Carvana’s strong performance in the first quarter and its optimistic outlook for the second quarter demonstrate its ability to navigate the challenges of an evolving market. As consumers continue to prioritize value and affordability, Carvana is well-positioned to capitalize on the growing demand for used cars.