The vehicles are seen on display at a Carvana dealership on February 20, 2023 in Austin, Texas.
Brandon Bell | fake images
carvana The stock rose 30% Friday morning after posting its first annual profit and receiving a pair of upgrades from Wall Street analysts.
The used car retailer has been cutting inventories and expenses as it recovers from the fall of the pandemic peak. After Covid fueled greater demand for online car sales, the company's shares soared. But after that demand disappeared, Carvana was forced to begin aggressive restructuring and cost-cutting.
In its after-hours earnings report on Thursday, the company posted its first annual profit with net income of $450 million for 2023, compared with a loss of $1.59 billion in 2022.
CEO Ernie Garcia told CNBC's Money Movers Friday morning that the company is in an “incredible competitive position.”
The company is currently in step two of a three-step restructuring plan, which includes reaching break-even on an adjusted EBITDA basis, driving the business to significant positive unit economics and returning to growth.
Its total gross profit per unit more than doubled to $5,283, up from $2,219 in the same period a year earlier, according to the quarterly report.
The company noted in its earnings report that the macroeconomic environment for auto sales remains uncertain, although it expects to increase retail units sold during the first quarter and into 2024.
Analysts at Raymond James upgraded their rating on the stock to “market perform” on Friday, highlighting encouraging GPU trends. The analysts wrote that investor sentiment “is aligning more closely with the narrative of Carvana's long-term market potential.”
The company's stock rose last year and now trades at around $70 per share, still well below its pandemic high of $370 per share, reached in 2021. The stock lost almost all of its value in 2022, which raised bankruptcy concerns that have since been alleviated by signs of recovery.
Analysts at William Blair also upgraded Carvana to “outperform” due to earnings increases and unit growth, and noted that they believe the company is “now poised for a further breakout” with the encouraging outlook for 2024.
Garcia said on CNBC that Carvana, with its 1% market share, is still focused on its current inventory despite last year's growth and profits.
“I think we have to look at what we're currently working on,” Garcia said. “There's no doubt that in the medium term, increasing our inventory to give our customers even more choice will be an important part of our strategy. I think our goal is to be in a place where customers come for the simplest experience. to get the best price and the best selection.”
