Evaluating Carvana Stock Pre-Q3 Earnings: Buy, Hold, or Avoid?

Carvana CVNA is slated to release third-quarter 2024 results tomorrow after market close. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at 23 cents per share and $3.43 billion, respectively.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The earnings estimate for the third quarter of 2024 has moved south by a cent over the past seven days. The bottom-line projection indicates no change from the year-ago figure. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year increase of 23.8%. Image Source: Zacks Investment ResearchFor the current year, the Zacks Consensus Estimate for CVNA’s revenues is pegged at $13.2 billion, implying a rise of 22.2% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of 59 cents per share. In the trailing four quarters, this e-retailer of used vehicles surpassed EPS estimates thrice and missed on one occasion.Q3 Earnings Whispers for CarvanaOur proven model predicts an earnings beat for Carvana this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.CVNA has an Earnings ESP of +42.22% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank socks here.What’s Shaping CVNA’s Q3 Results?Used vehicle retail units sold by Carvana returned to growth for the first time in the first quarter of 2024 since June 2022. In the second quarter of 2024, Carvana sold more than 100,000 cars, making it the second-largest used car retailer in the United States. Encouragingly, the company expects a sequential increase in the year-over-year growth rate of retail unit sales in the third quarter of 2024. Our model expects retail units sold to increase 30.3% year over year to 105,518 vehicles in the September quarter.Additionally, the company’s cost-cutting efforts are paying off. For the third quarter of 2024, we forecast adjusted EBITDA to surge 115% year over year to $318 million on the back of enhanced operational efficiency across the business, with several technology, process and product initiatives underway. It has successfully reduced its SG&A expenses by right-sizing staffing, advertising and inventory. These factors are likely to buoy CVNA’s adjusted EBITDA margins in the to-be-reported quarter.CVNA Price Performance & ValuationOn a year-to-date basis, shares of CVNA have rocketed 287%, significantly outperforming the broader market and its peers, including CarMax KMX, Sonic Automotive SAH and Lithia LAD.YTD Price Performance Comparison Image Source: Zacks Investment ResearchFrom a valuation standpoint, it's trading at a forward 12-month sales multiple of 2.74, higher than the industry and its own 5-year median as well as industry.Image Source: Zacks Investment ResearchHow to Play Carvana Stock NowThe acquisition of ADESA’s U.S. operations has enhanced CVNA’s logistics, auction, and reconditioning capacities. Additionally, Carvana’s strategic shift from aggressive growth to operational efficiency has been paying off well. Its disciplined three-step plan—focusing first on positive adjusted EBITDA, then boosting EBITDA per unit, and finally returning to growth under a streamlined model—has catalyzed a notable financial turnaround.Central to this progress are cost reductions in retail reconditioning and inbound transport, achieved through operational improvements such as in-sourcing, process standardization and enhanced logistics. As a result, gross profit per unit has grown. Carvana’s consistent delivery on its goals has reinvigorated investor confidence, fueling a substantial rally in its stock.We expect the company to deliver an earnings surprise in its upcoming report, which should sustain the stock price momentum. Current shareholders might benefit from holding, while new investors may wish to await a more favorable valuation entry point, as the current pricing reflects a stretched premium.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CarMax, Inc. (KMX): Free Stock Analysis Report Sonic Automotive, Inc. (SAH): Free Stock Analysis Report Lithia Motors, Inc. (LAD): Free Stock Analysis Report Carvana Co. (CVNA): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks