Carvana (CVNA) stock surges on 2023 profit, analyst upgrades

Karavana Shares of the company surged 30% on Friday morning after posting its first-ever annual profit and earning two rating upgrades from Wall Street analysts.

The used car retailer has been cutting inventory and spending to rebound from declines at the height of the pandemic. The company’s shares soared after the coronavirus pandemic boosted demand for online car sales. But after demand subsided, Kavanagh was forced to begin aggressive restructuring and cost-cutting.

In an after-hours earnings report on Thursday, the company reported its first annual profit in 2023, with a net profit of $450 million, compared with a loss of $1.59 billion in 2022.

CEO Ernie Garcia told CNBC’s Money Movers on Friday morning that the company is in an “incredible competitive position.”

The company is currently in the second step of a three-step restructuring plan, which includes achieving breakeven on an adjusted EBITDA basis, driving the business to achieve significant positive unit economics and return to growth.

Its total gross profit per unit more than doubled to $5,283 from $2,219 a year earlier, according to the company. Quarterly reports.

The company noted in its financial report that although retail sales are expected to grow in the first quarter and 2024, the macroeconomic auto sales environment remains uncertain.

Raymond James analysts upgraded the stock to “market perform” on Friday, highlighting encouraging GPU trends. Investor sentiment is “more consistent with the narrative of Carvana’s long-term market potential,” the analysts wrote.

The company’s shares soared last year and currently trade at about $70 a share, still well below its pandemic high of $370 a share set in 2021. The stock lost nearly all of its value in 2022, sparking bankruptcy fears, but those have since eased. signs of recovery.

William Blair analysts also upgraded Carvana to “outperform” on the back of rising profits and sales, noting that they believe the company is “now poised for further breakthroughs” with encouraging 2024 forecasts.

Garcia said on CNBC that despite achieving growth and profits last year, Carvana, which has a market share of 1%, is still focused on current inventory.

“I think we have to have a thorough understanding of what we are doing now,” Garcia said. “There is no doubt that in the medium term, increasing inventory to give customers more choice will be an important part of our strategy. I think our goal It’s about making the experience as simple as possible for customers to get the best prices and the best selection.”