Carvana stock rallied more than 20% Thursday morning, as analysts scrambled to hike their price targets on the stock after the online used-car leader late Wednesday beat quarterly expectations, again.
Carvana said second-quarter sales climbed 42% year over year to $4.84 billion. Diluted earnings of $1.28 a share were more than nine times above the year-earlier profit of 14 cents a share. It's the second-straight quarter of triple-digit EPS growth.
Analysts' consensus earnings estimate was $1.17 a share. Sales were expected to climb to $4.577 billion, according to FactSet.
Carvana sold 143,280 retail units in the quarter, a jump of 41%. Wholesale units (sold to other dealers) rose 44.5% to 72,770 vehicles. Analysts had modeled 142,328 retail unit sales and wholesale units at 69,742.
April saw strong demand following the rollout of auto tariffs in late March, the company noted.
Carvana Wednesday forecast adjusted EBITDA of $2 billion to $2.2 billion for the full year, an increase from $1.38 billion last year, "as long as the environment remains stable."
"These numbers once again make us the fastest growing and most profitable automotive retailer, both by significant margins," CEO Ernie Garcia III said in a note to shareholders. "And for the first time this quarter we are the most profitable not only by adjusted EBITDA margin, but also by total GAAP operating income and net income dollars."
JPMorgan, Wells Fargo and Bank Of America were among the five research firms to raise their price targets on the stock. New Targets ranged from 415 to 460, between 25% and 38% above where Carvana shares closed on Wednesday.
Carvana Stock Leads Group
The latest results solidify Carvana as the leader in its industry group. The stock has nearly doubled year to date, the best performance of any stock in the retail and wholesale auto group, according to IBD MarketSurge.
Shares broke out of a base at 292.84 on May 13 and had been testing support at the 50-day moving average the past week. The bounce off the line provides a new entry. Investors also could use 364 as an entry from a three-weeks-tight pattern.
Tempe, Ariz.-based Carvana posted an EPS surge of 557% in the March-ended quarter. Sales grew 15%, 32%, 46% and 38% the past four quarters.
In a novel — if not over-the-top — marketing strategy, Carvana built huge "vending machines" where shoppers can select cars. But usually it delivers vehicles to buyers by tow truck, and it also buys used cars for its inventory.
Carvana stock has a group-leading 97 Composite Rating and a 21-day average true range (ATR) of 3.71%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
