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Carvana Co. (NYSE:CVNA) Just Reported Third-Quarter Earnings: Have Analysts Changed Their Mind On The Stock?

Simply Wall St
·3 min read

Carvana Co. (NYSE:CVNA) shareholders are probably feeling a little disappointed, since its shares fell 8.5% to US$185 in the week after its latest quarterly results. Revenues of US$1.5b arrived in line with expectations, although statutory losses per share were US$0.10, an impressive 61% smaller than what broker models predicted. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Carvana

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Carvana's 20 analysts is for revenues of US$7.92b in 2021, which would reflect a sizeable 63% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 43% to US$1.35. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$7.90b and losses of US$1.42 per share in 2021. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.

There's been no major changes to the consensus price target of US$228, suggesting that reduced loss estimates are not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Carvana analyst has a price target of US$270 per share, while the most pessimistic values it at US$80.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Carvana'shistorical trends, as next year's 63% revenue growth is roughly in line with 56% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 9.1% next year. So it's pretty clear that Carvana is forecast to grow substantially faster than its industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Carvana going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Carvana (1 is a bit unpleasant!) that you need to be mindful of.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.