Carvana Achieves 2023 Profit and Receives Analyst Upgrades

Carvana (CVNA) stock witnessed a surge of 30% after reporting its first-ever annual profit and receiving upgrades from Wall Street analysts. The used-car retailer has been actively cutting costs and reducing inventory as it bounces back from the pandemic-induced decline. Carvana experienced a significant increase in demand for online car sales during the Covid-19 pandemic, resulting in a soaring stock price. However, as this demand waned, Carvana had to aggressively restructure its operations and implement cost-cutting measures.

In its after-hours earnings report, Carvana announced a net income of $450 million for 2023, marking its first annual profit. This is a substantial improvement compared to the $1.59 billion loss it incurred in 2022. CEO Ernie Garcia expressed confidence in the company’s competitive position during an interview with CNBC’s “Money Movers.”

Carvana is currently in the second phase of a three-step restructuring plan, which aims to break even on an adjusted EBITDA basis, achieve positive unit economics, and resume growth. The company’s total gross profit per unit more than doubled to $5,283, up from $2,219 in the same period last year, according to its quarterly report.

While the macroeconomic car-selling environment remains uncertain, Carvana expects growth in retail units sold for the first quarter of 2024 and throughout the year. Analysts at Raymond James upgraded their rating on Carvana’s stock to market perform, citing encouraging GPU (Gross Profit Unit) trends. The analysts noted that investor sentiment is aligning with Carvana’s long-term market potential. Similarly, William Blair analysts upgraded the stock to “outperform” due to the profit increases and unit growth. They believe Carvana is now positioned for further success based on its promising 2024 forecast.

Carvana’s stock price reached a high of $370 per share in 2021 but currently trades at around $70 per share. Despite last year’s growth and profitability, Carvana maintains its focus on its current inventory. CEO Ernie Garcia emphasized the company’s strategy of providing customers with a simple and affordable car-buying experience.

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