Shares in online used-car dealer Carvana soared yesterday after the company raised its Q2 guidance following its success in cost-cutting. The firm expects earnings before interest, taxes, depreciation and amortization to exceed $50m in Q2, while analysts had been anticipating a loss of $6.1m. Carvana also predicted non-GAAP total gross profit per unit to rise to more than $6,000, a 63% increase on last year’s Q2.
Founder and CEO Ernie Garcia said the updated guidance, which is an all-time high for the company, was evidence that its persistent focus on profitability was producing results. Carvana is due to release its Q2 results in early August. Shares soared more than 65% in intraday trading on the news.
It’s been a tough year for auto sales overall due to the pandemic, and Carvana has not been immune to its effects. However, the company’s focus on reducing costs and improving profitability is clearly paying off. Carvana has trimmed its inventory and scaled back its growth endeavors, leading to better-than-expected results.
This is a big win for Carvana, which has been steadily gaining market share in the highly competitive online used-car sales market. Its strong Q2 guidance should help solidify its position as a leader in the industry and give investors confidence in the company’s future prospects.
Carvana’s success also bodes well for other online used-car dealers, such as Vroom Inc and Shift Technologies Inc, whose shares rose following the announcement. The pandemic has accelerated the shift to online car sales, and companies that are able to successfully navigate this market are likely to see continued growth in the coming years.
Overall, Carvana’s Q2 guidance is a positive sign for the company and the industry as a whole. As the pandemic continues to reshape consumer behavior, companies that are able to adapt and innovate are likely to thrive, and Carvana seems to be leading the pack.
