Carvana (CVNA) stock surges on 2023 profits, analyst upgrades

caravana Shares soared 30% on Friday after reporting its first-ever annual profit and receiving two upgrades from Wall Street analysts.

Used car retailers have trimmed inventory and costs as they bounce back from declines at the peak of the pandemic. The company’s shares soared after the COVID-19 pandemic increased demand for online car sales. But after that demand disappeared, Carvana had to begin aggressive restructuring and cost cutting.

In its after-hours earnings report Thursday, the company posted its first full-year profit with net income of $450 million in 2023, compared with a loss of $1.59 billion in 2022.

CEO Ernie Garcia said on CNBC’s “Money Movers” Friday morning that the company is in an “incredible competitive position.”

The Company is currently undergoing Phase 2 of its three-phase restructuring plan, which includes achieving breakeven on an Adjusted EBITDA basis, driving the business to significantly positive unit economics, and returning to growth.

According to the quarterly report, gross profit per unit was $5,283, more than double the $2,219 in the same quarter last year.

The company noted in its earnings report that it expects retail sales to increase during the first quarter and 2024, but that the macroeconomic auto sales environment remains uncertain.

Analysts at Raymond James upgraded their rating on the stock versus market performance on Friday, highlighting encouraging GPU trends. Analysts wrote that investor sentiment is “more closely aligned with the narrative of Carvana’s long-term market potential.”

The company’s stock price has soared over the past year and currently trades at around $70 per share. This is still well above the pandemic high of $370 per share recorded in 2021. The stock lost almost all of its value in 2022, after which bankruptcy concerns eased. Signs of recovery.

William Blair analysts also upgraded Carvana’s rating to “outperform” due to increased profits and unit growth and said they believe the company is “now poised for further takeoff” with encouraging 2024 forecasts. pointed out.

Garcia told CNBC that Carvana has a 1% market share and is still focused on current inventory despite its growth and profits over the past year.

“I think we need to take a closer look at what we’re doing,” Garcia said. “There is no doubt that increasing stock to provide customers with more choice will be a big part of our strategy in the medium term. “I think our goal is to be the place where customers come to have the simplest experience, the best price and the best selection.”

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