Carvana’s stock soared over 30% in after-hours trading on Thursday following the used-car seller’s unexpected forecast of a rise in retail sales and core profit for the current quarter.
The surge in Carvana’s shares comes amidst increased consumer interest in used cars due to high interest rates, diverting buyers from new car purchases.
With a short interest of 27% of free float, Carvana’s shares have already risen by approximately 65% this year, following an impressive 11-fold increase in the previous year.
This surge in stock price is anticipated to boost its market capitalization by about $5 billion, adding to its existing $17.6 billion market cap as of Wednesday’s close.
The company anticipates a sequential increase in adjusted core profit and retail unit growth rate in the second quarter, surpassing analysts’ expectations of a 2.6% decline in retail sales compared to the previous year.
Carvana’s first-quarter revenue of $3.06 billion exceeded analysts’ estimates of $2.89 billion, marking a substantial beat, according to LSEG data.
“Revenues beat expectations by quite a bit, and expenses remained flat … big upside surprise,” noted Huber Research Partners analyst Douglas Arthur.
In the first quarter, adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) totaled $235 million, surpassing both capital expenditures and interest expense. Analysts had forecasted adjusted core earnings of $135.9 million.
Carvana reported a first-quarter profit of $49 million, outperforming analysts’ estimates of $31.2 million, according to LSEG data.
Despite CarMax’s recent fourth-quarter results missing analysts’ estimates and the uncertainty surrounding its long-term vehicle sales target, Carvana’s robust performance continues to strengthen its position in the used-car market.
