A stock listed on Wall Street excelled in the last two years and its value reached a maximum of US$260 in 2024, while at the end of 2022 it was below the u$s5. The growth was almost 330% in the last year.
It is about the used car e-commerce platform, Carvana (NYSE: CVNA), which experienced impressive growth.
As of today, Tuesday, January 7, the shares were trading at US$200.24, which represents an increase in 327% since the beginning of last year. In comparison, the index S&P 500 went up 29% in the same period and its immediate competitor CarMax (NYSE: KMX), the used car industry leader, rose just one 8%.
What’s wrong with Carvana stock?
Carvana reported its third consecutive quarter of net profits in the third quarter of 2024. Its earnings were approximately $1.26 per share, which represented a drop from 65% year-on-year, but much better than the $0.25 per share that the market anticipated.
Additionally, the automaker reported a 34% year-on-year increase in vehicle units sold in the third quarter, with expectations that this growth will accelerate in the fourth quarter of the year, indicating strong sales momentum in the current quarter. Revenue, for its part, grew by 32% year-on-year, reaching the US$3.7 billion. The adjusted EBITDA margin was 11.7% in the third quarter, which translates into an increase of 6.4 percentage points.
The debt restructuring initiative that the company implemented in early 2023 played a critical role in its recovery. This move allowed the stock to multiply approximately 40-fold in two years.
However, The company’s profitability remains fragile, with net income of $131 million (or $1.01 per share) in the first nine months of 2024. The debt restructuring postponed debt maturities and reduced annual interest expenses by approximately $450 million over two years. Despite this, when this agreement expires in the fall of 2025, Carvana will likely have to resume interest payments, which could reduce its profitability or even lead to losses.
Carvana has significant growth potential as it currently holds just 1% share of the used car market, generating approximately 40 million transactions annually.
Source: Ambito
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