Carvana Gears Up for Earnings Report, Aiming to Extend Rally

Carvana's (CVNA) stock emerged from near oblivion in 2022, witnessing a remarkable 97% plunge. However, the online car dealer has deftly executed a turnaround strategy, propelling its shares into the green. Anticipation is building for the company's fourth-quarter earnings announcement on Wednesday after the market close, with investors eyeing another boost to drive shares towards record highs.

Since the start of 2024, Carvana's stock has soared by an impressive 300%, further fueled by a 43% increase in 2025. It currently resides at a new 52-week peak. The pivotal question now is whether the company's Q4 figures can propel its stock back to levels not witnessed since 2021.

Consensus estimates from Bloomberg suggest Carvana's revenue will reach $3.34 billion for the quarter, reflecting a 32% increase year-over-year. However, it falls short of the $3.66 billion reported in Q3. Analysts anticipate adjusted EPS of $0.31 and adjusted EBITDA of $329.4 million.

Drilling down further, retail unit sales are projected to hit 108,339, with a retail gross profit of $3,219 per unit. Wholesale vehicle unit sales, encompassing auctions and dealer sales, are estimated at 52,018, yielding a gross profit of $714.21.

Thriving Amidst Pandemic, Navigating Market Challenges

Carvana's online-exclusive used car model flourished during the pandemic's onset. Americans sought the safety and convenience of personal transportation, coupled with the ability to purchase vehicles remotely. Sales surged from 2020 to 2021, but 2022 marked a shift. Used car prices skyrocketed, compelling Carvana to expand its inventory significantly.

Despite increased sales from $3.9 billion in 2019 to $12.8 billion in 2021, Carvana remained unprofitable. The inflated used car market eventually dampened consumer demand, leaving Carvana with high-priced inventory to be sold at a loss.

Turnaround Strategy and Recent Controversy

Carvana implemented sweeping cost cuts and tempered its used car acquisitions. It streamlined operations, reduced reconditioning expenses, and refinanced debt. These measures paved the way for the company's first annual profit in 2023.

However, Carvana's recent surge has faced scrutiny. Short seller Hindenburg Research alleged会计欺诈" and raised concerns about subprime loans and insufficient underwriting standards. While Hindenburg later suspended operations, its accusations have cast a shadow over Carvana's turnaround story.

As Carvana unveils its Q4 earnings, investors will scrutinize its performance, seeking indications of sustained profitability. The market anticipates another boost to drive shares higher, but the company's ability to maintain momentum amidst potential headwinds remains uncertain.