Carvana Co. Shares Jump Despite Missing Analyst Estimates

© Reuters Carvana Co. (CVNA) Shares Jump Despite Missing Analyst Estimates

By Sam Boughedda

Online vehicle e-commerce platform Carvana Co. (NYSE:CVNA) is up 34% Friday despite its lackluster second-quarter earnings report, which missed top and bottom line expectations.

Carvana posted a loss of $2.35 per share, $0.44 worse than the analyst estimate of a $1.91 loss per share. Revenue for the quarter came in at $3.88 billion, again missing the consensus estimate of $3.99 billion.

Retail units sold did, however, increase 9% year-over-year to 117,564.

In addition, Carvana's selling, general, and administrative expenses came in at $721 million, declining month-on-month.

"We made significant progress in Q2 across many fronts. We closed our acquisition of ADESA, outlined a new operating plan to quickly adapt to the changing market, and drove sequential improvement on all key metrics," said Ernie Garcia, founder and CEO of Carvana. "We also continue to deliver car buying experiences our customers love and are rapidly gaining market share as a result despite several industry and economic headwinds. We remain on the path to becoming the largest and most profitable auto retailer."

Reacting to the report, a Needham analyst reiterated a Buy rating on the stock and upped the firm's price target to $50 per share from $31.

"Our cash burn table improves, though only modestly as our retail units estimates for '22 & '23 come down 6%/10%, but profitability metrics improve modestly resulting in a higher projected cash balance. We see a greater likelihood of a further improvement in the near term given CVNA did not receive a full quarter's benefit of their newfound efficiency focus," said the analyst.

Meanwhile, a BofA analyst maintained a Buy rating and $64 price target on Carvana shares, stating the second quarter results were below expectations, but margins are improving.

"Despite the overall lower than expected results, management has shown that it is capable of cutting back on costs and widening margins. We see the quarter as a move in the right direction and remain optimistic on the business model," the analyst said in a note.