Carvana's share price surged by 20% post-earnings release.
Carvana (CVNA 0.19%) saw a surge in its share price on Thursday, climbing 20% by 11:25 a.m. ET, following its Q3 revenue figures surpassing analyst estimates.
Carvana announced revenue of $3.66 billion for the third quarter, outperforming predictions of $3.65 billion. It also seemed to have surpassed earnings expectations.
Carvana's Q3 Financials
As per data from Yahoo! Finance, analysts anticipated Carvana to record earnings of $0.25 per share for Q3, a significant decrease from the $3.60 profit achieved in the same quarter the previous year. However, reports indicated earnings of approximately $1.26 per share, representing a 65% decline yet still exceeding expectations. Carvana managed to register its third consecutive quarterly profit while sales increased by 32% year over year, even surpassing analyst projections.
Founder and CEO Ernie Garcia praised the company's performance, deeming it "exceptional." He further claimed Carvana as the "fastest-growing and most profitable automotive retailer" in the market, despite holding only a mere 1% share. This suggests ample opportunities for expansion and growth.
Should You Invest in Carvana Stock?
Moving on to projections for Q4, Carvana was cautious about providing specific guidance. However, the company reported a 34% year-over-year increase in the number of cars sold during Q3, with anticipations of another sequential rise in Q4. While Q3 revenue growth was slightly behind unit growth, this indicates sustained strong sales growth in the current quarter.
This growth trend is expected to translate into improved profits, potentially surpassing the current Wall Street projection of $0.00 per share profit for Q4. Carvana remains mum on exact profit figures but asserted that adjusted EBITDA for the quarter would exceed $1 billion.
Given its substantial free cash flow of $534 million over the past 12 months, despite a price-to-free-cash-flow ratio of 48 and an impressive growth rate, Carvana stock could be a promising investment option.
In light of Carvana's exceptional Q3 performance, with earnings surpassing expectations and a 32% year-over-year sales increase, some investors may be considering where to allocate their finance and money for potential returns. If you're interested in investing, Carvana's promising free cash flow of $534 million over the past 12 months and the expectation of improved profits in Q4 could make it an attractive option.
