Why Carvana Stock Soared 20% After Earnings

Source The Motley Fool

Carvana (NYSE: CVNA) stock motored higher Thursday, its stock up 20% through 11:25 a.m. ET after beating analyst forecasts for third-quarter revenue.

Carvana reported Q3 sales of $3.66 billion last night, edging out Wall Street forecasts for $3.65 billion. The company also appears to have beaten earnings expectations.

Carvana Q3 sales and earnings

According to Yahoo! Finance data, Carvana entered Q3 with analysts expecting it to earn $0.25 per share -- a steep decline from last year's $3.60 Q3 profit. In fact, earnings did decline to about $1.26 per share, a drop of 65%, but that was still a lot better than had been feared. It was also Carvana's third straight quarterly profit. Meanwhile sales soared 32% year over year, which was even better than the analysts had hoped.

Founder and CEO Ernie Garcia praised his own work, calling it "exceptional." He also declared Carvana the "fastest-growing and most profitable automotive retailer" -- and with only a 1% share of the car-selling market, a company with plenty of room to grow.

Is Carvana stock a buy?

Speaking of future growth, Carvana was a bit vague on guidance for Q4. The company grew "units" of cars sold 34% year over year in Q3, and says unit growth will rise sequentially in Q4. While the company's 32% revenue growth in Q3 was a bit slower than unit growth, this does imply that sales will keep growing strongly in the current quarter.

I'd expect that to translate into stronger profits as well -- at least stronger than the $0.00-per-share profit that Wall Street currently predicts. The most Carvana would say on the subject, though, is that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter will be $1 billion or better.

That being said, the company boasts strong free cash flow of $534 million over the last 12 months. Even at a price-to-free-cash-flow ratio of 48, with a growth rate this strong, Carvana stock could be a buy.

Should you invest $1,000 in Carvana right now?

Before you buy stock in Carvana, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Carvana wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $853,860!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of October 28, 2024

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
US Sept. PCE Preview: Inflation May Heat Up Again, How Will US Stocks, the Dollar, and Gold React?This Thursday (October 29), the US will release the September Personal Consumption Expenditures (PCE) price index. However, since the PCE report will be released after the Federal Reserve
Author  TradingKey
7 hours ago
This Thursday (October 29), the US will release the September Personal Consumption Expenditures (PCE) price index. However, since the PCE report will be released after the Federal Reserve
placeholder
Brent's $115 front month sits $4.6 above January — the $14 spread to WTI is the supply-risk premiumDecember Brent trades at $115.29 while January is $110.71, a $4.58 backwardation. The December Brent-WTI spread is $14.2, versus a $3-5 normal. That gap, not the headline, is where the Middle East supply risk is priced. Here is what the curve says, why the December contract's expiry on October 30 will mechanically cut the headline by $4.6, and the 108.81 neckline that decides the next move.
Author  Irene Q.
11 hours ago
December Brent trades at $115.29 while January is $110.71, a $4.58 backwardation. The December Brent-WTI spread is $14.2, versus a $3-5 normal. That gap, not the headline, is where the Middle East supply risk is priced. Here is what the curve says, why the December contract's expiry on October 30 will mechanically cut the headline by $4.6, and the 108.81 neckline that decides the next move.
placeholder
Bitcoin is back above $80,000 — but 75% of the bounce was shorts, not buyersBitcoin trades at $80,669, back above the $80,000 line after touching $79,145 on October 24. But 75.4% of the last 24 hours of futures liquidations were shorts, CME open interest fell 36,545 BTC in October, and spot ETFs lost $773.5 million on October 22-23. Price is up; positioning is down. Here is why the bounce is a squeeze, and the four things that would make it real.
Author  Suzie
11 hours ago
Bitcoin trades at $80,669, back above the $80,000 line after touching $79,145 on October 24. But 75.4% of the last 24 hours of futures liquidations were shorts, CME open interest fell 36,545 BTC in October, and spot ETFs lost $773.5 million on October 22-23. Price is up; positioning is down. Here is why the bounce is a squeeze, and the four things that would make it real.
placeholder
Gold rises above $4,050 ahead of Fed rate decisionGold price (XAU/USD) jumps to around $4,065 during the early Asian session on Wednesday, bolstered by lower oil prices. Traders await the Federal Reserve's (Fed) policy meeting later on Wednesday for signals on ‌the future path of US interest rates.
Author  FXStreet
16 hours ago
Gold price (XAU/USD) jumps to around $4,065 during the early Asian session on Wednesday, bolstered by lower oil prices. Traders await the Federal Reserve's (Fed) policy meeting later on Wednesday for signals on ‌the future path of US interest rates.
placeholder
Fed October Rate Decision Preview: Rate Hike Pause Has Become Consensus, How Will US Stocks, Dollar, and Gold React?The Federal Reserve will announce its October interest rate decision at 14:00 Eastern Time on October 28, and Fed Chair Warsh will hold a press conference at 14:30. Markets currently wide
Author  TradingKey
Yesterday 10: 21
The Federal Reserve will announce its October interest rate decision at 14:00 Eastern Time on October 28, and Fed Chair Warsh will hold a press conference at 14:30. Markets currently wide
goTop
quote