Carvana’s Q4 Earnings Report and Stock Performance: A Detailed Analysis

Carvana Corporation (CVNA), an online used-car retailer, reported its fourth-quarter earnings on February 22, 2024. The company’s stock responded positively to the report, with shares gaining 21.1% in extended trading and 6.2% in the regular session. In this article, we will provide a detailed analysis of Carvana’s Q4 earnings report and the subsequent stock performance.

Estimates and Results
Analysts had expected Carvana to report a loss of 85 cents per share for the quarter, a significant improvement from the loss of $7.61 per share in the same period the previous year. They also projected a revenue decline of nearly 10%, to $2.562 billion. However, Carvana reported a loss of $1 per share and revenue of $2.424 billion, which was down 15% compared to the previous year. Retail unit sales tumbled 13% to 76,090 during the seasonally weak fourth quarter.

Despite the lower-than-expected revenue and higher-than-expected loss, investors were encouraged by Carvana’s gross profit per unit, which rose to $5,283, surpassing estimates for $5,240. This metric is closely watched by investors as it provides insight into the profitability of each car sold.

Outlook
In the outlook section of the earnings report, Carvana provided guidance for the full year 2024. The company expects higher retail sales as well as adjusted EBITDA significantly above $100 million. This is a significant improvement from the previous year, when Carvana reported an adjusted EBITDA loss of $112.5 million. Retail sales are expected to be slightly up in the current quarter.

CEO Ernie Garcia expressed confidence in the business, stating, “We are seeing strength throughout the business.” This optimistic outlook helped to boost investor sentiment and contributed to the positive stock reaction.

Technical Analysis
From a technical perspective, Carvana’s stock showed strong performance following the earnings report. Shares popped 6.2% in the regular session and surged 21.1% in extended trading. The relative strength line for CVNA stock, which measures the stock’s performance relative to the S&P 500, surged in the back half of 2023 but had wilted in the early part of 2024. The RS line remains below the peak of the latest consolidation, indicating that the stock may still have room to run.

Background
Carvana is an online used-car retailer that disrupted the auto industry by selling cars online. The company has seen significant growth in recent years, with shares surging triple digits in 2023 after collapsing below $5 a share in 2022. For all of 2023, analysts expected Carvana to swing to earnings per share (EPS) of $1.04, a significant improvement from the loss of $1.21 per share in 2022. The company has slashed costs and restructured debt amid bankruptcy worries.

Competition
Carvana faces competition from both brick-and-mortar dealers, such as CarMax (KMX), and online competitors, such as Copart (CPRT) and ACV Auctions (ACVA). Copart reported earnings and revenue that missed analyst expectations, while ACV Auctions delivered a narrower-than-expected loss and revenue that slightly missed estimates. Carvana’s strong performance in the face of competition helped to boost investor sentiment and contributed to the positive stock reaction.

Market Conditions
The stock market as a whole has been experiencing strong performance in recent months, with the S&P 500 hitting record highs. The technology sector, in particular, has been performing well, with companies such as Nvidia (NVDA) and Tesla (TSLA) leading the way. Carvana’s strong performance in this market environment helped to boost investor sentiment and contributed to the positive stock reaction.

Conclusion
Carvana’s Q4 earnings report and subsequent stock performance provide insight into the company’s financial performance and investor sentiment. Despite reporting lower-than-expected revenue and a higher-than-expected loss, investors were encouraged by the company’s strong gross profit per unit and optimistic outlook for the full year 2024. The technical analysis of the stock also indicated strong performance following the earnings report. Overall, Carvana’s earnings report and stock performance suggest that the company is well-positioned for growth in the coming year.