Shares in Carvana (CVNA) surged by as much as 37% following the release of its Q1 2024 results, which the company itself hailed as its best quarter in history.
The used car sales company reported sales of 91,878 vehicles in the quarter, marking a 16% increase compared to Q1 2023. This represents the company’s third consecutive quarter of net profit, and its guidance for Q2 suggests further growth ahead.
Over the last twelve months, Carvana shares have skyrocketed by an astonishing 1,106%, largely driven by the squeezing out of short sellers who persist in targeting the stock. Presently, approximately 31% of the company’s float is held short.
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Carvana Q1’24 earnings in a nutshell
EPS: $0.23 (Est. -$0.74).
Revenue: $3.06 billion (Est. $2.72 billion); up +17% YoY.
Net Income: $49 million; Net Income Margin was 1.6%.
Retail Units Sold: 91,878 (UP +16% YoY)
Adjusted EBITDA: $235 million; Adjusted EBITDA Margin 7.7%
Total Gross Profit per Unit (GPU): $6,432 (up +$2,129 YoY)
Non-GAAP Total GPU: $6,802 (up +$2,006 YoY)
Key Highlights:
- Carvana achieved new Q1 milestones in terms of profitability metrics.”In the quarter we achieved adjusted EBITDA margin of 7.7%. By this measure, in Q1, we not only set new all-time company records, but we also became the most profitable public automotive retailer in the U.S for the first time. We returned to growth growing retail unit 16% year-over-year despite decreasing marketing dollars by 4% and having constrained inventory.” CEO Ernie Garcia
- The company’s adjusted EBITDA now surpasses both capital expenditures and interest expenses.”We completed our first quarter with adjusted EBITDA exceeding CapEx and interest expense, achieving this milestone by a significant margin. We achieved GPU that exceeds our previous record from Q2 2023 after normalizing for last Q2’s excess loan sales volume, achieving a GAAP gross profit margin of 19.3%, above the high-end of our long-term financial model.” CEO Ernie Garcia
- Carvana intends to make cash interest payments on 2028 and 2030 Senior Secured Notes in 2025.”Given our strong liquidity position and operating results, we currently plan to pay cash interest on our 2028 and 2030 senior secured notes on both semiannual payment dates in 2025, reducing long-term cash interest expense and supporting our plan to delever over time.” CEO Ernie Garcia
- Profitability is the key focus.”We are now focused on our long-term phase of driving profitable growth and pursuing our goal of becoming the largest and most profitable auto retailer and selling and buying millions of cars.” CEO Ernie Garcia
Q2’24 Outlook:
- Carvana expects an annual increase in growth rate for retail units.
- Anticipated sequential increase in Adjusted EBITDA.
“With our strong results in Q1 and outlook for Q2, we expect to comfortably deliver on our outlook of year-over-year growth in retail units sold and Adjusted EBITDA for FY 2024. Going forward, we do not plan to provide additional full year 2024 updates and will focus on quarterly commentary.” Carvana’s shareholder’s letter.
The Bottom Line
Short sellers have been slamming Carvana, betting big on its downfall due to its hefty debt and negative equity. But guess what? Carvana’s been flipping the script, showing improvement quarter after quarter and finally clocking its first annual net profit since hitting the stock market.
Yet, despite this glow-up, Carvana’s still a prime target for shorts, with over 30% of the float betting against it. The company’s not in the clear just yet, but it’s definitely flexing those improvement muscles.
In short (pun intended), these short sellers might want to cool it—they’re playing with fire.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content)
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