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  • Writer's pictureRealFacts Editorial Team

Carvana Soars Over 30% After Earnings

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Carvana Co. (CVNA), an online used car retailer based in Tempe, Arizona, reported earnings after the close on Wednesday. Carvana's business model revolves around purchasing cars directly from customers through its online platform, offering them quick valuations and convenient pick-up or drop-off options. Leveraging its robust logistics network, Carvana efficiently transports these cars to locations where they hold the highest value, facilitating swift transactions and enhancing customer satisfaction. In this last quarter, Carvana announced a significant turnaround in its financial performance, reporting a net income of $49 million, a notable improvement from a loss of $286 million compared to the previous year. Adjusted EBITDA stood at $235 million which was well above the $24 million loss seen in the first quarter of 2023. The company's revenue for the quarter reached $3.06 billion, surpassing analysts' expectations of $2.67 billion, marking a more than 17% increase. Following Carvana's impressive first-quarter performance the online auto retailer's stock surged over 30% on Thursday.

The impressive performance of Carvana's first quarter spurred many analysts to upgrade their ratings and raise their price targets for the company. JPMorgan upgraded Carvana from neutral to overweight and raised its price target from $70 to $130. Similarly, Baird analyst Colin Sebastian increased the firm's price target on Carvana from $65 to $110 while maintaining a neutral rating. Wells Fargo analyst Zachary Fadem also lifted the price target on Carvana stock from $60 to $77. The significant increase in price targets and the substantial earnings beat propelled the stock to its highest level since April 2022.

Following the significant increase in the stock's value, Ernie Garcia, Carvana's Founder and CEO, appeared on Bloomberg Markets: The Close to discuss the factors behind the recent quarter's successes. Host Alix Steel inquired whether the earnings beat was primarily attributed to the U.S. economy's acceleration or if it reflected Carvana's operational performance. Garcia responded, emphasizing that it was primarily the latter, highlighting the exceptional performance of the team despite the challenging years experienced in 2022 and 2023. He went on to say, “When we went through that period, I think the team came together and responded incredibly well. This quarter is undoubtedly the best quarter we've had in our history.”  Garcia maintains a bullish outlook on the company's future, expressing confidence in significant room for growth. He stated, “We were extremely proud to report $235 million of EBITDA in Q1. You annualized that and it's about a billion dollars a year, and we're 1% of the market. So we are clearly sitting in front of a huge, huge opportunity.” If Carvana can successfully expand its market share, substantial growth potential may be realized in the upcoming quarters.

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