5. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Investors: 61
Jim Cramer recently discussed Carvana Co. (NYSE:CVNA), highlighting its recent price movement. He noted that Carvana’s stock had experienced a “bad island reversal,” where the stock price surged and then dropped back down. Despite this, Cramer emphasized the potential strength of Carvana Co. (NYSE:CVNA)’s CEO, Ernie Garcia, stating that Garcia is a powerful force in the industry.
“Okay, today it had what’s known as a bad island reversal—went all the way up and then came back down. Now, I’ll tell you this: Ernie Garcia is kind of an unstoppable force, and as rates go lower, he will do even better. Do not buy this stock right here at 153. Let it come in. It’s been hanging here for a couple of weeks. If you can get this stock in the 140s, I would start picking some up.”
Carvana Co. (NYSE:CVNA)’s recent performance indicates a strong bullish outlook for the company. In Q2 2024, Carvana Co. (NYSE:CVNA) achieved a significant turnaround, reporting a net income of $48 million, a marked improvement from earlier profitability challenges. Carvana Co. (NYSE:CVNA) saw a 33% increase in retail units sold, reaching 101,440 units, and a 15% rise in revenue to $3.41 billion. These results highlight Carvana Co. (NYSE:CVNA)’s solid market position and its ability to scale effectively in the competitive used car market.
A standout achievement was Carvana Co. (NYSE:CVNA)’s record Adjusted EBITDA of $355 million with a 10.4% margin, setting a new benchmark for public automotive retailers. This reflects Carvana Co. (NYSE:CVNA)’s strong operational efficiency and successful execution of its strategies, including national vehicle acquisition, a proprietary fulfillment network, and an in-house lending platform.
Looking forward, Carvana Co. (NYSE:CVNA)’s management is optimistic, projecting full-year 2024 Adjusted EBITDA between $1.0 and $1.2 billion, a significant increase from the previous year. Carvana Co. (NYSE:CVNA)’s ongoing efforts to improve customer experience, expand inventory, and enhance logistics position it well for future growth. Carvana Co. (NYSE:CVNA)’s stock has surged over 180% year-to-date, showcasing strong investor confidence in its potential to capture a larger share of the still-developing automotive e-commerce market.
Here’s what Carvana Co. (NYSE:CVNA)’s CFO, Mark Jenkins, has to say in their latest earnings call:
“The second quarter was an exceptional quarter for Carvana and reinforce the significant and sustainable progress we have made and continue to make in our current multiyear phase of driving profitable growth. For the second consecutive quarter, we generated positive net income and we set new company records for adjusted EBITDA, adjusted EBITDA margin and GAAP operating income. For the first time, quarterly adjusted EBITDA margin approached the midpoint of our long-term financial model EBITDA margin range of 8% to 13.5%, and we see meaningful opportunities for fundamental gains to drive towards the higher end of that range over time. Moving to our second quarter results.
Unless otherwise noted, all comparisons will be on a year-over-year basis. Q2 again demonstrated the strength of our differentiated business model. Retail units sold increased 33% despite continued focus on unit economics and profitability initiatives as the strong demand we experienced in Q1 continued into Q2. Revenue increased by 15%. Revenue grew less than retail units, primarily due to industry-wide declines in retail and wholesale vehicle average selling prices. In Q2, our operational teams focused on increasing production capacity to increase selection to more optimal levels for our customers. The teams met their production targets in the quarter, but we still remain below our target available website inventory due to continued strong demand.
In the near term, we will continue to increase production across the country. Our strong profitability results in Q2 were driven by meaningful fundamental improvements in GPU and SG&A expenses. In the second quarter, non-GAAP total GPU was $7,344, an increase of $314 and a new company record. Non-GAAP retail GPU was $3,539, an increase of $677 and a new company record. Our strength in retail GPU continues to be driven by fundamental gains and consistent performance in several areas, including uveal cost of sales, customer sourcing, inventory turn times and revenues from additional sources. Year-over-year changes were also driven by higher spreads between wholesale and retail market prices, partially offset by higher retail depreciation rates and a lower retail inventory allowance adjustment.” (Click here to see more…)
