Carvana’s Record First Quarter Results Drive 30% Surge in Share Price

According to information released during after-hours trading on Wednesday, shares of Carvana surged more than 30% after the company reported record-breaking results and made a profit in the first quarter,

Here’s how Carvana did in the first quarter, compared to what experts expected:

  • Earnings per share: 23 cents (it’s not immediately clear if this is comparable to the expected loss of 74 cents)
  • Revenue: $3.06 billion (compared to the expected $2.67 billion)

Carvana reported a record net income of $49 million in the first quarter, compared to a loss of $286 million in the same period last year. The company also achieved its best-ever adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $235 million, up from a loss of $24 million a year earlier.

Investors closely watch Carvana’s gross profit per unit (GPU), which was $6,432 this quarter. Carvana’s adjusted EBITDA profit margin for the quarter was 7.7%.

Carvana's Record First Quarter Results Drive 30% Surge in Share Price
Net income increased from a $286 million loss to a $49 million gain.

Carvana’s net income includes a gain of about $75 million in the fair value of warrants to acquire Root Inc.’s common stock. This didn’t affect its GPU or adjusted EBITDA.

Carvana’s CEO and Chairman, Ernie Garcia III, said, “In the first quarter, we delivered our best results in company history, validating our long-held belief that Carvana’s online retail model can drive industry-leading profitability while delivering industry-leading customer experiences.”

Garcia attributed the company’s strong performance to efficiency improvements in operations, especially in reconditioning vehicles for sale, as well as in selling, general, and administrative expenses.

Carvana plans to keep increasing its adjusted EBITDA profit margin as it grows, according to Garcia. However, he didn’t say how much higher the company believes it can grow those results.

Carvana’s shares surged over 30% after record-breaking profits in the first-quarter earnings report. (Credits: Google Finance)

“I really believe that looking at just one quarter can tell us a lot about our future. If we do things right, this might be our best quarter yet, and it feels amazing,” Garcia told CNBC during a phone interview on Wednesday night.

The company is aiming to cut costs even more or find ways to work more efficiently to make more money. This includes things like spending less on advertising and reducing other expenses related to running the business.

Garcia also mentioned that Carvana is focusing on improving how it fixes up and sells cars. In March, the company’s inventory of cars was at its lowest in nearly a month. To deal with this, Carvana has increased its ability to fix cars by about 60% in the past year.

“Getting more cars to sell is pretty straightforward, but making sure they’re ready to sell is harder,” he explained. “Right now, we don’t have as many cars in stock as we’d like, but we’re working hard to fix that. We’re in a good position to do it.”

CEO Garcia emphasizes future focus on profitability and efficiency gains for sustained growth.

These good results come after Carvana made some big changes in the last couple of years to focus more on making money than just growing the business. This shift happened after concerns about bankruptcy when Carvana’s stock dropped a lot in value in 2022. Since then, the company’s stock has gotten better.

Before reporting its first-quarter results, it had gone up about 67% since the start of the year.  On Wednesday, the stock closed at about $87.09 per share, up about 5%. In a letter to shareholders from Garcia and finance chief Mark Jenkins, they said the company is now focusing on growing in a way that makes money.

“We’re now focused on growing in a way that makes us money in the long run and reaching our goal of being the biggest and most profitable car seller, buying and selling millions of cars,” the letter said.

For the next quarter, the company expects to sell more cars compared to last year and make more money before taking out things like interest, taxes, and other expenses.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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