On Thursday, BTIG raised its price target on Carvana Co. (NYSE:CVNA) to $188 from $155, while maintaining a Buy rating on the stock. The used auto retailer exceeded expectations with significant growth in retail units sold and gross profit per unit (GPU), alongside impressive expense management that contributed to a substantial rise in adjusted EBITDA.
Carvana reported a 33% year-over-year increase in retail units sold, reaching 101,440, surpassing both the Street's expectation of 95,100 and near buy-side expectations of approximately 100,000 units. The company notably outperformed on GPU, especially in front-end margins, with non-GAAP Retail GPU at $3,539, up $328 quarter-over-quarter.
This figure starkly contrasts with the performance of competitors like AutoNation (NYSE:AN) and Penske Automotive, which saw a much smaller increase and a decline in front-end used car profit, respectively.
Moreover, Carvana demonstrated strong performance in other GPU areas, posting $2,701, and even with an adjustment for an unusual benefit, the figure would still exceed expectations by over $100.
The company also showcased effective expense control; retail and wholesale operations expense rose by merely 1% despite a 10% quarter-over-quarter increase in retail vehicle sales, reducing the cost per unit to $1,696 from $1,850 in the first quarter of 2024.
Carvana's adjusted EBITDA for the second quarter of 2024 was reported at $355 million, significantly higher than the consensus estimate of $253 million. The company has also provided guidance for the remainder of the fiscal year, projecting sequential unit growth and adjusted EBITDA between $1.0 billion and $1.2 billion.
The analyst highlighted Carvana's position in the market, emphasizing the rarity of combining industry-leading profitability and growth. With the revised price target to $188, BTIG reflects increased confidence in Carvana's ability to meet or surpass bullish expectations.
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