Good morning. Used car dealer Carvana had an epic rise, crazy fall, and now the CFO is getting some of the credit for an unexpected turnaround that has powered the stock up more than 500% in a year.
Carvana, a Fortune 500 company, is an e-commerce platform for buying and selling used cars. It was founded in 2012 and went public in 2017. Carvana cofounder Ernie Garcia has served as president and CEO since the company’s founding, while CFO Mark Jenkins came on board in July 2014. Before joining Carvana, Jenkins was a professor in the finance department at The Wharton School of the University of Pennsylvania for five years teaching undergraduate, MBA, and executive education programs on corporate restructuring, corporate credit, and leveraged finance.
The Tempe, Ariz.-based company reached a new 52-week high of $136.92 on Friday. The company has come a long way from plummeting to an all-time low of $3.55 on Dec. 7, 2022, a 99% plunge from a record high of $370.10 in 2021.
I had a conversation with Seth Basham, a managing director at Wedbush Securities. Carvana’s “turnaround has been nothing short of remarkable,” Basham noted. He credits CFO Jenkins for being "one of the key executives that has helped control costs at the company," especially on the selling, general, and administrative expenses side. Jenkins worked with the executive team to find efficiencies in operations, and he's also been "instrumental" in managing the balance sheet, particularly when it came to debt restructuring, Basham said.
In Q1 2024, Carvana sold 91,878 retail units, an increase of 16% year over year, for a total revenue of $3.1 billion, up 17% compared to the same time last year.
However, Carvana is facing some headwinds as efficiency gains appear more limited, according to Basham. "It's going to be a lot more difficult for them to sharply accelerate their fundamentals, particularly the bottom line because they've made most of the available gains in efficiencies in their operations," he said. It's a used auto retailer, and a very “operationally intensive business,” which doesn't scale like a tech company would scale, he said. The operational intensity includes hiring staff to acquire the cars, recondition and move them, and also service customers, he explained.
During the company's Q1 earnings call in May, Jenkins pointed to the strategic goals: "We are now focused on our long-term phase of driving profitable growth and pursuing our goal of becoming the largest and most profitable auto retailer and selling and buying millions of cars."
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Sheryl Estrada
sheryl.estrada@fortune.com
