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Carvana (CVNA - Free Report) is a Zacks Rank #1 (Strong Buy) that operates an e-commerce platform for buying and selling used cars. The company has an end-to-end business model that transformed traditional used-car sales.
The stock was on fire over the summer after some impressive earnings numbers created a short squeeze. During the squeeze, CVNA lifted from under $10 to hit a high of $57.
It has since pulled back 50%, so the upcoming earnings report is a huge catalyst.
The bulls hope another earnings beat can start another squeeze. The bears are looking for a miss, that would put the stock back below its 200-day moving average for the first time since June.
While the current price action is poor, earnings estimates have been ticking higher, giving a slight edge to the bulls as we go into the print in early November.
About the Company
Carvana was founded in 2012 and is headquartered in Tempe, AZ.
Its platform allows customers to research and identify a vehicle; inspect it using the company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile device
The stock has a Zacks Style Score of “A” in Growth and “B” in Momentum. However, the company has negative earnings and has a score of “D” in Value. CVNA currently employs over 16,000 and has a market cap of $5 billion.
Q2 Earnings Beat and Q3 Guide
In July, Carvana reported a 51% EPS beat and announced plans to restructure its debt.
Q2 came in at -$105M v the -$439M last year and revenue was $2.97B v $2.62B. Carvana set a company record for adjusted EBITDA and gross profit per unit, which was up 94% year-over-year, all while continuing to lower expenses.
The stock shot higher, moving from the low $40s into the high $50s. The squeeze was on as hedge funds were forced to cover their short position in the stock.
A few weeks later, Carvana raised its Q3 adjusted EBITDA to $75M v the $45M expected. Management noted early momentum in the quarter citing strong execution and fundamental gains in Retail and Wholesale GPU.
The stock didn’t react to the news but then started to move higher in September on positive debt exchange news.
But since then, the stock has made a steady move lower as the overall market has weakened. Higher interest rates are making investors nervous, especially when it comes to smaller companies and businesses whose customers are impacted by interest rates.
This is why the upcoming earnings report on November 2nd is a huge catalyst.
Analyst Estimates
Looking at analyst estimates ahead of earnings, the numbers are giving the bulls hope as they have been trending higher.
Looking at the current quarter, have estimates moving 11% higher over the last 90 days. For the next quarter, estimates have gone from -$0.99 to -$0.84 over that same time frame, or 15%.
Looking at the longer term, estimates are moving higher as well.
For the current year, analysts have taken numbers from -$4.16 to -$3.70, or 11%. For next year, we see estimates go from -$3.09 to -$2.68, or 13%.
William Blair was recently out with a positive note ahead of EPS. The firm says that its web analysis suggests that Carvana will post its first sequential increase in retail units sold since June 2022. They see a 5% sequential increase to roughly 80,000 cars, about 3,000 cars ahead of consensus and above guidance for units sold similar to the second quarter.
William Blair maintains its Market Perform based on valuation.
If that outlook is correct and the company reports better than expected, the stock likely trades higher.
The Technicals
The stock is off about 50% since its highs over the summer. While a pullback is likely justified after the short squeeze, there does seem to be an opportunity on the long side if earnings come in better than expected.
The 200-day moving average is at $24 and the bulls can lean against that level. Upside areas for profit-taking are the $34 area and the $40 level, which is right below the 50-day moving average.
Bottom Line
Carvana is in a good spot to post another earnings beat, which would be its fourth in a row. While earnings momentum looks to be going in the right direction, the stock price is not.
If the company can surprise to the upside on earnings, the bulls can force another squeeze. However, long-term investors should be cautious based on Wall Street’s valuation concerns.
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Bull of the Day: Carvana (CVNA)
Carvana (CVNA - Free Report) is a Zacks Rank #1 (Strong Buy) that operates an e-commerce platform for buying and selling used cars. The company has an end-to-end business model that transformed traditional used-car sales.
The stock was on fire over the summer after some impressive earnings numbers created a short squeeze. During the squeeze, CVNA lifted from under $10 to hit a high of $57.
It has since pulled back 50%, so the upcoming earnings report is a huge catalyst.
The bulls hope another earnings beat can start another squeeze. The bears are looking for a miss, that would put the stock back below its 200-day moving average for the first time since June.
While the current price action is poor, earnings estimates have been ticking higher, giving a slight edge to the bulls as we go into the print in early November.
About the Company
Carvana was founded in 2012 and is headquartered in Tempe, AZ.
Its platform allows customers to research and identify a vehicle; inspect it using the company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile device
The stock has a Zacks Style Score of “A” in Growth and “B” in Momentum. However, the company has negative earnings and has a score of “D” in Value. CVNA currently employs over 16,000 and has a market cap of $5 billion.
Q2 Earnings Beat and Q3 Guide
In July, Carvana reported a 51% EPS beat and announced plans to restructure its debt.
Q2 came in at -$105M v the -$439M last year and revenue was $2.97B v $2.62B. Carvana set a company record for adjusted EBITDA and gross profit per unit, which was up 94% year-over-year, all while continuing to lower expenses.
The stock shot higher, moving from the low $40s into the high $50s. The squeeze was on as hedge funds were forced to cover their short position in the stock.
A few weeks later, Carvana raised its Q3 adjusted EBITDA to $75M v the $45M expected. Management noted early momentum in the quarter citing strong execution and fundamental gains in Retail and Wholesale GPU.
The stock didn’t react to the news but then started to move higher in September on positive debt exchange news.
But since then, the stock has made a steady move lower as the overall market has weakened. Higher interest rates are making investors nervous, especially when it comes to smaller companies and businesses whose customers are impacted by interest rates.
This is why the upcoming earnings report on November 2nd is a huge catalyst.
Analyst Estimates
Looking at analyst estimates ahead of earnings, the numbers are giving the bulls hope as they have been trending higher.
Looking at the current quarter, have estimates moving 11% higher over the last 90 days. For the next quarter, estimates have gone from -$0.99 to -$0.84 over that same time frame, or 15%.
Looking at the longer term, estimates are moving higher as well.
For the current year, analysts have taken numbers from -$4.16 to -$3.70, or 11%. For next year, we see estimates go from -$3.09 to -$2.68, or 13%.
William Blair was recently out with a positive note ahead of EPS. The firm says that its web analysis suggests that Carvana will post its first sequential increase in retail units sold since June 2022. They see a 5% sequential increase to roughly 80,000 cars, about 3,000 cars ahead of consensus and above guidance for units sold similar to the second quarter.
William Blair maintains its Market Perform based on valuation.
If that outlook is correct and the company reports better than expected, the stock likely trades higher.
The Technicals
The stock is off about 50% since its highs over the summer. While a pullback is likely justified after the short squeeze, there does seem to be an opportunity on the long side if earnings come in better than expected.
The 200-day moving average is at $24 and the bulls can lean against that level. Upside areas for profit-taking are the $34 area and the $40 level, which is right below the 50-day moving average.
Bottom Line
Carvana is in a good spot to post another earnings beat, which would be its fourth in a row. While earnings momentum looks to be going in the right direction, the stock price is not.
If the company can surprise to the upside on earnings, the bulls can force another squeeze. However, long-term investors should be cautious based on Wall Street’s valuation concerns.