Carvana on Thursday said it expects to achieve positive adjusted earnings during the second quarter of this year — earlier than many anticipated — as the used car retailer executes a restructuring focused on profits over growth.
The stock was up by more than 25% in extended trading Thursday to above $9 a share. Carvana closed Thursday at $7.20 per share.
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The company, which pre-announced first-quarter results in March, beat Wall Street’s expectations for adjusted losses per share, recording a loss of $1.51 per share, versus Refinitiv consensus estimates of $2. Revenue of $2.61 billion came in exactly in line with Refinitiv projections.
The embattled used car retailer has been working to reduce costs, narrow losses and increase profits per vehicle. The company’s stock fell roughly 98% last year as it overspent to gain sales and increase vehicle inventory amid weakening demand.
Carvana said Thursday it achieved a previously announced reduction in selling, general and administrative expenses of $1 billion a quarter early.
The company last year announced plans to achieve a positive EBITDA this year, however pulled that guidance due to “current industry and macroeconomic conditions.”
“The first quarter was a big step in the right direction and there are more steps to come. Given our strong start to the year, we expect to achieve positive adjusted EBITDA in Q2 2023,” Carvana CEO Ernie Garcia said in an earnings release. “It is clear our strategy and execution are working as evidenced by our 61% increase in gross profit per unit, the best first quarter GPU in company history.”
Wall Street was watching for additional steps in the restructuring of the company as well as improvements in total gross profit per unit, specifically. GPU was $4,303, an increase of 52% compared to the first quarter of 2022.
Sales also came in ahead of expectations, at 79,240 units, compared with a previously stated forecast of between 76,000 and 79,000 units. Sales during the same quarter last year were 105,000 units.
Carvana was a coveted stock during the Covid pandemic, as consumers moved toward online car purchasing and the used vehicle market skyrocketed due to a lack of inventory of new vehicles. But the company failed to capitalize at the right time and launched the restructuring of the business.