Carvan-yeah! Auto Giant's Q1 Earnings Drive Optimism, Analysts Rejoice

Carvana Co CVNA shares are trading higher since its first-quarter beat and positive outlook.

Piper Sandler analyst Alexander Potter maintained Carvana with an Overweight and raised the price target from $20 to $21.

Benchmark analyst Michael P. Ward had a Hold rating on the stock.

Carvana reported a Q1 EPS loss of $(1.51) versus $(2.89) a year ago, beating his estimate of $(2.71). 

The company reported a loss at the EBITDA level of $(38) million, a $354 million improvement from the year-earlier period. CVNA expects to achieve positive adjusted EBITDA in Q2 of 2023, the first profitable quarter since 3Q 2021.

CVNA improved inventory efficiency, reduced headcount, and cut back discretionary spending. 

Needham analyst Chris Pierce reiterates Hold post-Q1 earnings that were materially better with outlook highlighting further efficiency enhancements. 

The analyst views the improved operational metrics positively. Still, he expects a more precise picture of a return to growth or an agreement with debt holders, as his updated adjusted EBITDA estimates will not drive equity shareholder returns in the near term after backing out interest payments to bondholders.

Stephens analyst Daniel Imbro reiterated an Equal-Weight on the stock with a price target of $9.00.

The EBITDA beat vs. Imbro's estimate was due to lower SG&A (other overhead costs & more inadequate compensation per unit, mainly), higher wholesale gross profit (more robust wholesale pricing & ADESA), and higher retail GPU. 

For Q2, CVNA expects positive adjusted EBITDA, with units down sequentially, non-GAAP SG&A flat, and non-GAAP GPUs improving.

Management made meaningful progress in reducing expenses, and the analyst will listen for color around the ability to restart growth in the second half with this low expense base. He will also look for color around inventory availability, used demand affordability headwinds, and asset-backed securities (ABS) market conditions.

Price Action: CVNA shares are trading higher by 25.10% at $9.01 on the last check Friday.