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Is Carvana (CVNA) Worth Buying Pre-Q2 Earnings Release?
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Carvana (CVNA - Free Report) is slated to release second-quarter 2024 results on Jul 31, after the market close. The Zacks Consensus Estimate for the to-be-reported quarter is breakeven earnings on revenues of $3.2 billion.
The earnings estimate for the second quarter of 2024 has improved from a loss of a penny to breakeven over the past seven days. The bottom-line projection indicates a year-over-year jump of 100%. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year increase of 7.8%.
Image Source: Zacks Investment Research
For the current year, the Zacks Consensus Estimate for CVNA’s revenues is pegged at $12.43 billion, implying a rise of 15.4% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of 30 cents per share. In the trailing four quarters, this e-retailer of used vehicles surpassed EPS estimates thrice and missed on the other occasion, with the average earnings surprise being 54.8%.
Our proven model predicts an earnings beat for Carvana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Demand for used vehicles remained strong in the quarter under discussion, which is expected to have benefitted Carvana. Notably, retail units sold by Carvana returned to growth for the first time in the first quarter of 2024 since June 2022, rising 16% year over year on strong demand, improved conversion and strong execution. The company notified on its last earnings call that it expects a sequential increase in its year-over-year growth rate of retail unit sales in the second quarter of 2024. Our model expects retail units sold to increase 17.1% year over year to 89,593 vehicles in the second quarter of 2024.
Additionally, the company’s cost-cutting efforts are paying off. In first-quarter 2024, the company registered record adjusted EBITDA of $235 million. For the second quarter of 2024, it expects a sequential rise in adjusted EBITDA. We forecast the metric to increase 57.5% year over year to $244.2 million on the back of enhanced operational efficiency across the business, with several technology, process and product initiatives underway.
Price Performance & Valuation
On a year-to-date basis, shares of CVNA have rocketed 151%, outperforming its peers, including CarMax (KMX - Free Report) , AutoNation (AN - Free Report) and Lithia (LAD - Free Report) .
YTD Price Comparison
Image Source: Zacks Investment Research
From a valuation standpoint, it's trading at a forward 12-month sales multiple of 1.97, slightly higher than its 5-year median but way lower than its 5-year high.
Image Source: Zacks Investment Research
Assessing Carvana’s Prospects
Carvana’s three-step plan— focusing on achieving positive adjusted EBITDA, enhancing adjusted EBITDA per unit and returning to growth— sparks optimism. The acquisition of ADESA’s U.S. operations has significantly bolstered Carvana’s logistics, auction capabilities, and reconditioning processes, promising to increase its annual reconditioning capacity from 1.3 million to 3 million units. This expansion enhances vehicle quality and supply, potentially boosting profitability.
Additionally, Carvana's operational efficiencies, from in-sourcing services to process standardization, have reduced reconditioning and transport costs. Combined with expanded customer sourcing and new revenue streams from value-added services, these improvements are driving retail gross profit per unit higher. This multi-faceted approach positions Carvana for sustained growth and improved financial performance, making it a promising investment in the evolving auto retail sector.
Last Word
Despite Carvana's impressive triple-digit percentage growth year to date, significant upside potential remains due to its operational efficiency, cost management and a clear plan for returning to profitability and growth. Anticipated earnings beat in the upcoming results could further drive this rally. Current shareholders should hold onto their stock, while new investors should consider adding Carvana to their portfolios. With the share price still well below its 2021 peak of $377, Carvana presents an opportunity for substantial returns.
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Is Carvana (CVNA) Worth Buying Pre-Q2 Earnings Release?
Carvana (CVNA - Free Report) is slated to release second-quarter 2024 results on Jul 31, after the market close. The Zacks Consensus Estimate for the to-be-reported quarter is breakeven earnings on revenues of $3.2 billion.
The earnings estimate for the second quarter of 2024 has improved from a loss of a penny to breakeven over the past seven days. The bottom-line projection indicates a year-over-year jump of 100%. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year increase of 7.8%.
For the current year, the Zacks Consensus Estimate for CVNA’s revenues is pegged at $12.43 billion, implying a rise of 15.4% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of 30 cents per share. In the trailing four quarters, this e-retailer of used vehicles surpassed EPS estimates thrice and missed on the other occasion, with the average earnings surprise being 54.8%.
Carvana Co. Price, Consensus and EPS Surprise
Carvana Co. price-consensus-eps-surprise-chart | Carvana Co. Quote
Earnings Whispers for Q2
Our proven model predicts an earnings beat for Carvana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
CVNA has an Earnings ESP of +3,699.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Shaping Q2 Results?
Demand for used vehicles remained strong in the quarter under discussion, which is expected to have benefitted Carvana. Notably, retail units sold by Carvana returned to growth for the first time in the first quarter of 2024 since June 2022, rising 16% year over year on strong demand, improved conversion and strong execution. The company notified on its last earnings call that it expects a sequential increase in its year-over-year growth rate of retail unit sales in the second quarter of 2024. Our model expects retail units sold to increase 17.1% year over year to 89,593 vehicles in the second quarter of 2024.
Additionally, the company’s cost-cutting efforts are paying off. In first-quarter 2024, the company registered record adjusted EBITDA of $235 million. For the second quarter of 2024, it expects a sequential rise in adjusted EBITDA. We forecast the metric to increase 57.5% year over year to $244.2 million on the back of enhanced operational efficiency across the business, with several technology, process and product initiatives underway.
Price Performance & Valuation
On a year-to-date basis, shares of CVNA have rocketed 151%, outperforming its peers, including CarMax (KMX - Free Report) , AutoNation (AN - Free Report) and Lithia (LAD - Free Report) .
YTD Price Comparison
Image Source: Zacks Investment Research
From a valuation standpoint, it's trading at a forward 12-month sales multiple of 1.97, slightly higher than its 5-year median but way lower than its 5-year high.
Image Source: Zacks Investment Research
Assessing Carvana’s Prospects
Carvana’s three-step plan— focusing on achieving positive adjusted EBITDA, enhancing adjusted EBITDA per unit and returning to growth— sparks optimism. The acquisition of ADESA’s U.S. operations has significantly bolstered Carvana’s logistics, auction capabilities, and reconditioning processes, promising to increase its annual reconditioning capacity from 1.3 million to 3 million units. This expansion enhances vehicle quality and supply, potentially boosting profitability.
Additionally, Carvana's operational efficiencies, from in-sourcing services to process standardization, have reduced reconditioning and transport costs. Combined with expanded customer sourcing and new revenue streams from value-added services, these improvements are driving retail gross profit per unit higher. This multi-faceted approach positions Carvana for sustained growth and improved financial performance, making it a promising investment in the evolving auto retail sector.
Last Word
Despite Carvana's impressive triple-digit percentage growth year to date, significant upside potential remains due to its operational efficiency, cost management and a clear plan for returning to profitability and growth. Anticipated earnings beat in the upcoming results could further drive this rally. Current shareholders should hold onto their stock, while new investors should consider adding Carvana to their portfolios. With the share price still well below its 2021 peak of $377, Carvana presents an opportunity for substantial returns.