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Carvana shares have risen more than 7,000% since December 2022, reaching a valuation of $52 billion.
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The company was almost bankrupt in 2022 due to financial problems and high interest rates.
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Wall Street firms have rushed to raise price targets for Carvana after strong earnings reports
Carvana investors have been on a roller coaster ride in recent years, and for those who were able to stick with it, it’s paid off.
The used car dealer, famous for its car tower vending machines, was on the brink of bankruptcy in December 2022 and its stock price plunged 98% to a valuation of about $400 million.
The stock has since risen more than 7,000% to a valuation of $52 billion, and the latest earnings results show the company hitting new records.
In its third-quarter earnings report, Carvana reported record adjusted EBITDA of $429 million on revenue of about $3.7 billion, far exceeding Wall Street estimates.
Meanwhile, the total number of cars sold in the quarter rose 34% to 108,651 units. Shares of Carvana rose about 22% on Thursday following the results, trading at $248.82 as the market neared the close.
“Carvana’s exceptional results underscore our position as the fastest growing and most profitable automotive retailer,” said Ernie Garcia, CEO of Carvana.
It’s a remarkable turnaround for a company that was all but left for dead by investors two years ago when it experienced a credit crunch due to an overstretched balance sheet and weakening consumer prospects. It didn’t help that financing options dried up when the Federal Reserve aggressively raised rates in 2022 and 2023.
Carvana successfully fended off creditors including Apollo Global Management, convincing them to take a $1.3 billion discount on its underwater bonds as the company rushed to cut costs and right-scale its operations to take.
The massive effort, led by CEO and founder Ernie Garcia, has paid off and it appears Wall Street is starting to catch up on the Carvana story.
More than ten Wall Street companies raised their price targets on Thursday following the company’s solid earnings results. According to Bloomberg data, Carvana’s average price target is around $200, still below the $255 per share price the stock was trading at on Thursday afternoon, leaving room for more potential upgrades in the future.
JPMorgan raised its price target for the stock to $300 per share and reiterated its “Overweight” rating in a note Thursday.
“The Q3 24 results should be viewed as a clearing event that is likely to ease lingering concerns/skepticism about CVNA’s recent progress on unit economics, shifting focus to the unique benefits of the operating model and its broader competitive position relative to peers, strengthened by recent forays into commercial-retail marketplace that unlocks a significant profit opportunity with infrastructure and resources to scale,” JPMorgan said.
