Carvana Expects Surge In Used Car Demand On New Vehicle Oversupply

Online used car retailer Carvana Co CVNA anticipates a surge in used car sales amid a potential oversupply of new vehicles, according to Chief Executive Officer Ernest Garcia III. 

Speaking at an event hosted by the Automotive Press Association near Detroit, Garcia stated that increased car production by major automakers is likely to benefit the online used-car retailer, reported Bloomberg.

Garcia highlighted automakers’ efforts to mitigate swelling inventories by offering incentives and directing more new cars to fleet purchasers like rental companies. 

According to Deutsche Bank AG DB, average new car inventories in the U.S. reached 50 days’ worth of supply by the end of April, marking a two-day increase from March and a 17-day surge from the previous year.

Carvana experienced a resurgence in its financial performance, driven by robust sales and debt restructuring. 

Contrary to analysts’ projections of a $116 million loss, Carvana reported a net income of $49 million earlier this month, including a one-time gain.

In the first quarter of 2024, Carvana witnessed a growth in vehicle sales for the first time in six quarters, propelling its revenue to $3.1 billion. 

Despite this progress, the company grapples with a substantial debt exceeding $6 billion, alongside escalating interest payments on its restructured loans.

Garcia reaffirmed Carvana’s second-quarter guidance for sequential growth in earnings before interest, taxes, depreciation, and amortization (EBITDA). 

He also expressed optimism about the company’s trajectory towards sustainable net profits, inclusive of interest payments.

CVNA stock has gained over 944% in the past year. Investors can gain exposure to the stock via Global X E-Commerce ETF EBIZ and Amplify ETF Trust Amplify Online Retail ETF IBUY.

Price Action: CVNA shares are trading lower by 1.33% at $119.35 at the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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