Carvana Stock Jumps: Q1 Surpasses Expectations, Says Analyst

BofA Securities analyst Michael McGovern on Thursday reiterated a Buy rating on the shares of Carvana Co (NYSE:CVNA) and raised the price forecast from $290 to $295.

Carvana delivered a strong beat-and-raise quarter, highlighted by 46% year-over-year growth in unit sales. The company posted revenue and EBITDA of $4.23 billion and $488 million, ahead of consensus estimates of $3.99 billion and $434 million, respectively.

Retail units came in at 134,000, surpassing expectations of 127,000, while retail GPU reached $3,308, exceeding estimates by $55, said the analyst.

Total GPU was $7,120, slightly below its projection of $7,160. Financing revenue per unit climbed 5% quarter-over-quarter to $2,900.

Management highlighted strong year-over-year improvements in operational efficiency, fixed cost leverage and advertising effectiveness. Free cash flow of $205 million beat the Street’s forecast of $126 million.

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Management commented that tariffs have had minimal negative effects to date, noting a modest increase in demand ahead of implementation, followed by a slight dip and subsequent stabilization.

Retail GPU remained consistent with fourth quarter levels, but management maintains a positive outlook for long-term improvement in total GPU, including both retail margins and financing.

While tariffs on auto parts could pose a short-term headwind to Retail GPU, pricing adjustments may offset the impact. Financing GPU rose 18% year-over-year and 5% quarter-over-quarter, supported by the addition of new loan buyers, a continued strong relationship with Ally, and improved funding conditions driven by better credit metrics.

Higher sales of vehicle service contracts (VSCs) also contributed, though online penetration still lags behind traditional brick-and-mortar auto retailers.

Outlook: The analyst raised the second-quarter unit sales forecast for Carvana (CVNA) to 138,000 (up 3% Q/Q, 36% Y/Y), with projected EBITDA of $536 million, above the Street's $495 million. Full-year EBITDA is now expected to hit $2 billion.

Management cited capacity for over one million annual units and early progress in new car sales. Carvana has a strong growth potential in a still-low online penetration market, said the analyst.

CVNA Price Action: Carvana shares traded higher by 11.47% at $288.90 at publication on Thursday.

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