Carvana late Thursday gave stronger-than-expected earnings guidance for the current quarter, signaling a rebound in used-car sales. Carvana stock rocketed Friday above a buy point.
The online used-vehicle retailer turned in a "fundamentally mixed" report for the fourth quarter, analyst Brad Erickson of RBC Capital Markest said in a note to clients Friday. The analyst noted Carvana's Q4 miss on units sold, revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization). He said 2024 unit sales outlook is also "likely" to disappoint.
"The much stronger (Q1) EBITDA outlook trumped all of it and is driving the squeeze," Erickson said.
Carvana stock's huge recent gains have been tied, in part, to a short squeeze. A short squeeze occurs when a stock moves sharply higher, prompting traders who had sold short — betting the price would fall — to exit those trades, increasing the upward pressure on the stock price.
Online used-car auction specialist Copart posted an earnings miss after Thursday's close. Its startup peer ACV Auctions early Thursday delivered a narrower-than-expected loss.
Carvana Earnings, Carvana Stock
Estimates: Analysts expected the online used-car seller to sharply narrow losses to 85 cents a share in the fourth quarter, from a loss of $7.61 a year ago. They projected revenue will fall nearly 10%, year over year, to $2.562 billion, FactSet shows.
For the seasonally weak Q4, Carvana had previously guided lower retail volume, offset by strong profits per unit sold.
Results: Carvana lost $1 per share in Q4. Revenue sank 15% to $2.424 billion.
The company's retail unit sales tumbled 13% to 76,090 during the fourth quarter, the earnings release showed.
Its gross profit per unit, a closely watched metric, rose to $5,283.
Carvana posted a profit of 80 cents for the full year, on the back of strong Q3 results.
Outlook: For 2024, Carvana said Thursday it expects to grow retail unit sales as well as adjusted EBITDA.
That includes guidance for adjusted EBITDA "significantly above $100 million" in the current first quarter. FactSet showed consensus views for $70.5 million ahead of Carvana earnings and now shows $116.9 million after earnings. Carvana also expects "slightly" higher Q1 retail unit sales, which would mark a return to growth for the first time since Q2 2022.
"We are seeing strength throughout the business," CEO Ernie Garcia said in a letter to shareholders.
Shares soared 31.4% to 68.88 on the stock market today, closing in the bottom half of the day's range. Carvana stock on Friday seized a 57.89 buy point from a cup-with-handle base.
The auto retail stock popped 6.2% to 52.44 Thursday, rebounding from support at the 21-day exponential moving average.
Brick-and-mortar rival CarMax gained 3.3% Thursday. It edged up further Friday.
The relative strength line for CVNA stock, the blue line in the chart shown, surged in the back half of 2023. The RS line bolted to a new high Friday, marked by a blue dot at the end of that strength indicator on the MarketSmith chart.
After collapsing to below $5 a share in 2022, Carvana stock surged triple digits last year. Founded in 2012, the startup disrupted the auto industry by selling used cars online.
More recently, the company slashed costs and restructured debt amid bankruptcy worries.
Earnings: Copart, ACV Auctions
Copart late Thursday missed earnings views for its fiscal second quarter by a penny, FactSet Shows.
But Copart earnings grew 8% and were in-line with consensus when excluding a one-time $3 million charge in the U.K., one analyst said. Revenue rose nearly 7%, year over year, despite lower-than-expected vehicle sales and service revenues.
The company provides online auctions for used and salvaged vehicles.
Copart stock popped 4.1 Friday, closing just below a 51.53 buy point. Shares gained 1.1% Thursday.
Early Thursday, startup ACV Auctions delivered a Q4 loss of three cents per share, better than feared, on Revenue of $118 million. Year over year, the loss narrowed by four cents while revenue jumped 20%. Sales accelerated for a second straight quarter, but slightly missed estimates.
ACV Auctions stock jumped 17.2% to 16.41 Thursday and added 0.7% Friday. It is still below the IPO price of $25.
