Carvana (CVNA) is revving up its engines, ready to leave the competition – and all the recent short sellers – in the dust. The virtual car dealer has painted a bullish outlook for the second quarter of 2023 that has investors in a frenzy, driving share prices more than 60% higher yesterday.
But what exactly happened? While the auto retailer has been teasing an upbeat outlook for a while, they finally got a bit more specific as to what we could expect in the upcoming earnings. Now, they’ve shed light on these prospects, projecting an adjusted EBITDA exceeding $50 million, a stark contrast to the Wall Street analysts’ gloomy forecasts of a $6 million loss.
The company has also forecast a non-GAAP total gross profit per unit (profit per car) of over $6,000 – an unprecedented record, considering the firm’s history of grappling with debt. For context, Carvana reported a figure of $4,796 just last quarter.
Ernie Garcia, the founder, and CEO of Carvana, attributed this promising outlook to the company’s relentless pursuit of profitability. In his statement, Garcia emphasized the significant cost savings and efficiencies they’ve achieved, assuring investors of their commitment to executing their strategic plan.
While the auto market has begun to normalize, prices are still high for new and used cars alike. This has investors and analysts curious as to what the future could hold for Carvana. We’ll have to wait a few more months, as the company won’t report 2nd quarter earnings until August.
In Friday’s trading session, share prices began their fall back to earth – as CVNA stock is down more than 12% so far today. Still, the prospect of record profits is nothing to scoff at. We last wrote about Carvana losing 98% of its value in February of this year. It’s clear that much has changed since then – but has our stance on this stock updated with the latest news?
Below, we’ve analyzed CVNA through the VectorVest stock analyzing software to offer an up-to-date look at 3 important factors that will help you determine whether this stock belongs in your portfolio or not.
CVNA Still Has Poor Safety and Very Poor Upside Potential – But the Timing is Excellent!
VectorVest helps you uncover winning opportunities on autopilot while guiding you through the execution of your strategy. By relying on just 3 simple ratings, you can eliminate guesswork, emotion, and unnecessary time spent in front of your screen – all while winning more trades!
These ratings are relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00, with 1.00 being the average for quick & easy interpretation. But it gets easier – as the system issues a clear buy, sell, or hold recommendation for a stock based on these ratings. As for CVNA, here’s the latest update:
- Very Poor Upside Potential: The RV rating is a comparison of a stock’s long-term price appreciation potential alongside AAA corporate bond rates and risk. And right now, the RV rating is as poor as it gets at 0.01. And, the stock is still overvalued with a current value of just $0.83.
- Poor Safety: In terms of risk, CVNA still has poor safety – with an RS rating of 0.64. This is calculated through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Excellent Timing: This is where things get interesting – because despite all the issues this stock has, the RT rating of 1.60 is excellent. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.06 is just above the average and deemed to be fair. But is it enough to justify adding this stock to your portfolio? Or should you wait to see how the current price trend holds, and how the company actually performs in the 2nd quarter?
Get a clear buy, sell, or hold recommendation today at VectorVest to eliminate emotion or guesswork from your strategy! A free stock analysis awaits you.
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VectorVest advocates buying safe, undervalued stocks, rising in price. While CVNA has definitely piqued the interest of investors by teasing record profits, excellent timing is the only thing this stock has going for it – the safety is poor, and the upside potential is even worse.
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