What Happened?
Shares of online used car dealer Carvana (NYSE: CVNA) jumped 17.7% in the afternoon session after the company reported strong second-quarter results that surpassed analyst expectations for both revenue and earnings.
The online used-car retailer announced revenue of $4.84 billion, a 42% jump from the previous year, and earnings per share, a key measure of profitability, of $1.28. Both figures comfortably beat Wall Street forecasts. The company also sold a record 143,280 vehicles to retail customers, a 41% increase. Following the impressive report, Carvana provided an optimistic forecast for the full year. This strong performance prompted a wave of positive reactions from analysts, with firms like Needham and BofA Securities raising their price targets on the stock.
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What Is The Market Telling Us
Carvana’s shares are extremely volatile and have had 45 moves greater than 5% over the last year. But moves this big are rare even for Carvana and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 3.3% on the news that investment bank Oppenheimer upgraded the stock to Outperform from Perform, setting a $450 price target. The investment bank's analysts pointed to a more efficient cost structure, increased cash generation, and a better demand environment for the used-car retailer. Oppenheimer also noted the potential for Carvana to gain market share as tariffs were expected to increase the prices of new cars, a factor that could push more buyers into the used vehicle market. The firm significantly raised its adjusted EBITDA forecast for Carvana's second quarter to $561 million, surpassing the consensus analyst expectation of $532 million. Further bolstering investor confidence, research firm BTIG also maintained its Buy rating on the stock.
Carvana is up 96.2% since the beginning of the year, and at $391.54 per share, has set a new 52-week high. Investors who bought $1,000 worth of Carvana’s shares 5 years ago would now be looking at an investment worth $2,527.
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