Shares of used car retailer Carvana (NYSE:CVNA) gained over 2% in after-market trading yesterday after the company swung to profit in the third quarter. CVNA is an online automotive retailer that allows customers to buy, sell, and finance used cars.
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CVNA reported earnings of $3.60, compared with the consensus estimate of a loss of $0.70. Also, the reported figure compares favorably with a loss of $2.67 per share. However, the company posted revenues of $2.77 billion in the quarter, down 18% year-over-year, and came below Wall Street’s expectations of $2.81 billion.
The reduction in top-line numbers was due to the 21% decline in retail units sold during the quarter. Additionally, the adjusted gross profit per unit of $6,396 increased by 65%.
For the fourth quarter, Caravana expects a sequential fall in retail units sold, driven primarily by industry and seasonal patterns. Also, it anticipates generating a positive adjusted EBITDA and adjusted GPU of over $5,000 for the third consecutive quarter.
Analyst’s Take
Following the earnings release, Wells Fargo analyst Zachary Fadem maintained a Hold rating on CVNA stock. The analyst expressed his concerns about CVNA’s leveraged balance sheet, which had over $5 billion in debt.
Is Carvana Stock a Buy, Sell, or Hold?
Overall, Carvana stock has a Hold consensus rating based on one Buy, six Holds, and three Sells. The average stock price target of $39.56 implies a 32.2% upside potential. The stock has skyrocketed 546% so far in 2023.
