Carvana Earnings Beat The Street, Stock Pulls Back From Fresh 52 Wk Highs

Carvana's stock price (NYSE: CVNA) has been on a tear in recent months, with a gain of 41% year-to-date being further dwarfed by the 440% gain in the past 12 months of trading. With earnings coming after yesterday's closing bell, the stock pushed to a new 52 week high on the day, hitting $292.84 to reflect the highest level for more than 3 years before fading 0.95% into the close. It could be said that after such an impressive rally, expectations have been set high.

The company operates an e-commerce platform specialising in the buying and selling of used cars in the U.S., and it has become almost expected that the company beats earnings by a wide range.

In recent periods, the EPS beats in percentage terms have read 269%, 424%, and 131%. This time around, EPS did not disappoint, coming in at $0.56 against the expected $0.32, however the scale of the beat (75%) is lower than previous, and below the $1.14 in the prior quarter.

Revenue came in at $3.55B, itself beating the expected $3.34B by upwards of 6%. This figure represents a 46% increase on the previous year.

The company also reported a GAAP operating income of $990 million with a 7.2% margin, and a net income of $404 million, achieving a 3.1% margin. In Q4 alone, Carvana sold 114,379 retail units, marking a 50% year-over-year increase

Despite the impressive numbers, Carvana's stock trades in extended hours just shy of 10% down from yesterday's close, bringing the price to ~$254. The mid to upper $250 range is notable for having previously provided resistance back towards the end of last year. Time will tell if this level will be ready to act as support as the days and weeks progress.

Looking to the future, Carvana plans to continue integrating ADESA sites, with six integrations completed in 2024 and intentions to open about 10 mega sites. This strategy, along with a diversified funding approach, aligns with the company's long-term financial model aiming for an EBITDA margin of 8% to 13.5%

Despite the strong performance, Carvana acknowledges the expenses associated with maintaining a retail unit sales capacity exceeding 1 million units, which may influence future profitability. The company also made an adjustment to their at the market offering on the day via regulatory filings.