A surprise quarterly profit puts Carvana investors in the driver’s seat.
Used vehicle retailer Carvana (CVNA 1.05%) is about as cyclical as a business can get. If the economy is shaky, people will often keep driving their current vehicles rather than buy newer ones.
Yet, even while America’s economy struggled somewhat under high interest rates and stubborn inflation, Carvana and its shareholders had a successful 12 months. Now, its greatest triumph could be achieving profitability — something that shouldn’t be taken for granted during these challenging times.
Carvana stock accelerates
Plunking down $1,000 on Carvana stock a year ago was a risky wager that paid off handsomely. The share price revved up from around $45 a year ago to $136 earlier this week, for a 202% return on an investment in just 12 months.
With that, a $1,000 investment in Carvana stock ballooned to $3,022.22. It could be tempting to take profits after realizing gains of that magnitude.
Yet, an argument could also be made for staying the course. After all, success tends to beget success, and Carvana certainly succeeded in its most recently reported quarter.
Another unexpected profit
For two consecutive quarters, Carvana has delivered a profit even as Wall Street’s consensus estimate called for an adjusted net loss. The second quarter offered up a particularly potent surprise as net income of $48 million handily beat the analysts’ consensus forecast of a nearly $16 million loss.
Furthermore, Wall Street expected Carvana to sell 95,100 vehicles in the second quarter, but the actual result was 101,440 units, up 33% year over year.
Looking further down the road, management guided for full-year 2024 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1 billion to $1.2 billion. This would represent a substantial improvement, if it actually happens, when compared to 2023’s adjusted EBITDA of $339 million.
And Carvana anticipates a sequential increase in retail units sold in the third quarter compared to the second quarter. With that in mind, investors can certainly stay invested in Carvana even after a tremendous year.
David Moadel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
