Carvana (CVNA 51.97, +4.91, +10.43%) shares spiked as much as 19% higher
in morning trade after its mixed quarter was overshadowed by strong guidance.
The online-based used car dealership reported a worse than expected second quarter loss of $0.37/share on a 127.0% year/year jump in revenue to $475.29 mln, which was ahead of estimates.
The company issued upbeat guidance for the remainder of the year, priming the market for third quarter revenue between $480 mln and $520 mln, ahead of Capital IQ consensus estimates. The company expects to sell between 23,000 and 25,000 units, which would translate to growth between 96% and 113%. Total gross profit is expected to improve from $1,742 per unit to $2,100-$2,350 per unit.
Looking farther ahead, Carvana expects that revenue for the fiscal year will be between $1.85 bln and $1.95 bln while unit sales are expected to increase between 107% and 116%, coming in between 91,500 and 95,500.
Returning to second quarter results, the company sold 22,570 units, a year/year increase of 111%. Gross profit per unit grew 44.8% to $2,173. The company hopes to see continued growth in gross profit per unit until reaching its target of $3,000.
EBITDA margin remained negative but improved to -8.8% from -16.1% one year ago.
Average days to sale declined to 66 from 70 in the previous quarter. One year ago, it took an average of 105 days to sale.
The company continued growing its footprint during the quarter, opening nine new markets and four vending machines. The company now operates in 65 markets with inventory divided among 12 vending machines. Carvana expects to operate in 79-84 markets by the end of the fiscal year. Construction of the company’s fifth inspection and reconditioning center (IRC), expected to significantly boost Carvana’s logistical efficiency in Midwest markets, is now underway near Indianapolis.
Other forward-looking strategies discussed in the earnings release include hopes to commit greater resources toward investing for scalability to meet accelerating customer demand and growing efforts to purchase vehicles directly from customers, which Carvana sees as an encouraging emerging business line – and the long-term opportunity to create “a better way to sell and trade a car” does present a neat complement to the company’s core goal: “to create a better way to buy a car.”
Today’s trading action carried the stock to all-time highs confidently above previous highs posted just shy of $50 in mid-July. The stock launched its IPO in April of 2017.
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