Why Carvana Stock Soared Today

Key Points

• Carvana easily beat estimates on the top and bottom lines.

• Margins have soared as revenue is growing, and it's benefited from operational efficiencies.

• The company still has a massive addressable market to penetrate.

• 10 stocks we like better than Carvana ›

Carvana (NYSE: CVNA) continues to wow the market as shares of the leading online used car seller jumped after it delivered a strong profit in its second-quarter earnings report.

As a result, the stock was up 16.7% as of 11:45 a.m. ET.

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Image source: Carvana.

Carvana revs higher

Carvana continued to post strong growth in the second quarter, with unit sales up 41% to 143,280 units, and revenue jumping 42% to $4.84 billion, which easily beat estimates at $4.59 billion.

That growth also drove margin expansion, as adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 70% to $601 million, giving it an EBITDA margin of 12.4%. Generally accepted accounting principles (GAAP) earnings per share jumped from $0.14 to $1.28, showing the improvement in its profitability and beating expectations at $1.14.

The company credited that growth to improvements in operations, including expanding its selection by about 50%, and it's integrated 12 ADESA sites into its inspection and reconditioning center network. That's given it more locations to store cars and therefore helped it reduce inbound transport distances by 20%, lowering costs.

CEO Ernie Garcia said:

Our record Q2 results further validate the strength and differentiation of the Carvana model. Carvana's industry-leading growth is the result of delivering an experience that customers love, and our industry-leading profitability is driven by our unique, efficient, and vertically integrated business model.

What's next for Carvana?

Management didn't give detailed guidance for the third quarter, but said it expected a sequential increase in retail units sold and adjusted EBITDA as long as the environment remained stable. For the full year, the company expects adjusted EBITDA of $2 billion-$2.2 billion, up from $1.38 billion in 2024.

Carvana continues to target 3 million cars sold annually over the long term. Considering the massive addressable market in used cars and the momentum in the business, the stock could easily move higher from here.

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Jeremy Bowman has positions in Carvana. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.