For the second consecutive quarter Carvana (CVNA) has delivered an impressive earnings beat coupled with an optimistic outlook for the upcoming quarter, sending shares nearly 40% higher Thursday morning.
The online car retailer easily delivered an earnings beat for the first quarter of 2024. Revenue of $3.06 billion was a 17% improvement year over year and blew the $2.67 billion analysts were expecting out of the water. This was the result of a 16% improvement in retail vehicle sales, up to 91,878.
This was coupled with a dramatic turnaround from a profitability standpoint. Net income of $49 million worked out to 23 cents per share – meanwhile, the analyst consensus was expecting a loss of 67 cents per share. After all, this time last year Carvana reported a loss of $286 million, or $1.51 per share.
Part of this is due to better pricing on vehicles along with cost-cutting measures. The company said its gross profit per unit was $6,432, nearly triple that of last year’s Q1 profit/unit at just $2,129.
CEO Ernie Garcia applauded his team’s performance in the quarter, saying it was the best result in company history. This could be a turning point for the company as it appears its online retail model has been validated in its ability to drive industry-leading profitability while creating better car shopping experiences for customers.
Looking ahead to Q2 Carvana is expecting an uptick in sales year over year alongside more improvements to adjusted EBITDA. The company also doubled down on its previous forecast for year-over-year growth in 2024 on both the top and bottom lines.
Today mirrors the performance we saw back in February in which the stock rallied 38% after a solid Q4 performance. The stock sat at just under $74/share at the time, and today, it’s all the way up to $120/share. CVNA has now gained nearly 130% so far through 2024.
However, we found something in the VectorVest stock analysis software that indicates it may not be time to buy this stock just yet.
CVNA Still Has Very Poor Upside Potential Despite Fair Safety and Excellent Timing
VectorVest is a proprietary stock rating system designed to save you time and stress while empowering you to win more trades. It’s all based on 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on a scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation. You’re also offered a buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. As for CVNA, here’s what we found:
- Very Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This is a far superior indicator than the typical comparison of price to value alone. CVNA has a very poor RV rating of 0.03 right now. The stock appears to be way overvalued with a current value of just $6.47.
- Fair Safety: The RS rating is a risk indicator that factors in a company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. CVNA is a fairly safe stock with an RS rating just below the average at 0.95.
- Excellent Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year. CVNA has an excellent RT rating of 1.97, reflecting the torrent pace this stock has been on over the past year - it’s now up 1,631% in that span!
CVNA has a very good VST rating of 1.34, but does excellent timing outweigh very poor upside potential, or vice versa? For now, the stock is rated a HOLD.
However, you’ll want to stay up to date and get the full scoop on this opportunity through a free stock analysis at VectorVest! Transform the way you trade for the better today.
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VectorVest advocates buying safe, undervalued stocks, rising in price. CVNA crushed the expectations for Q1 earnings and climbed another 40%, bringing its full-year gain to over 130%. The stock has very poor upside potential, but fair safety and excellent timing.
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