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Carvana Q2 Preview: Can Shares Find New Life?

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The Zacks Internet – Commerce Industry has tumbled year-to-date, decreasing more than 23% in value. However, the industry has outperformed the general market over the last month, tacking on nearly 11% in value. The table below illustrates the industry’s performance vs. the S&P 500 in several timeframes.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

One company residing in the industry that’s on deck to report quarterly results before the market opens on Thursday, August 4th, is the widely-recognized Carvana CVNA.

Carvana is a leading e-commerce platform utilized to buy and sell used cars. It’s a unique business model and undoubtedly a reason why the company has gained so much attention.

How do things look for the company as it rides into its quarterly print? Let’s take a closer look.

Share Performance & Valuation

Over the last year, CVNA shares have been suffocated, losing nearly 90% in value. It’s one of the deeper valuation slashes we’ve seen as of late.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

However, the chart below is jaw-dropping.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Carvana shares have tacked on a massive 60% in value over the last month, crushing the S&P 500’s performance and signaling that the bulls have finally come back into town.

Furthermore, CVNA shares could be overvalued, further bolstered by its Style Score of an F for Value. However, the company’s forward price-to-sales ratio sits at 0.4X, well beneath its five-year median of 3.1X.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been overwhelmingly bearish for the quarter to be reported over the last 60 days, with five estimate revisions coming in. Undoubtedly concerning, the Zacks Consensus EPS Estimate resides at -$1.81, reflecting a staggering 800% drop in quarterly earnings year-over-year.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

However, CVNA’s top-line is in much better shape – the quarterly sales estimate of $3.9 billion pencils in an 18.3% double-digit uptick in revenue from the year-ago quarter.

Quarterly Performance & Market Reactions

As of late, Carvana has struggled to exceed EPS expectations, chaining together three consecutive bottom-line misses. Just in its latest quarter, the company posted a double-digit 68% bottom-line miss.

However, quarterly sales results have been robust – Carvana has chained together seven consecutive top-line beats. The chart below illustrates the company’s revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition, the market hasn’t been impressed with the company’s quarterly results, with shares moving downwards four times out of the last six prints.

Putting Everything Together

Carvana shares have been hot over the last month but are down by nearly 90% over the previous year. Valuation levels appear elevated even after the sell-off, with the company carrying a Style Score of an F for Value.

Furthermore, analysts have been bearish about the quarter to be reported, and earnings are expected to drop significantly. However, the top-line is projected to register solid growth.

As of late, the company has struggled to exceed bottom-line estimates but has repeatedly exceeded quarterly revenue projections. The market hasn’t reacted well as of late to CVNA’s quarterly results, another factor investors should note.

Heading into the print, Carvana CVNA carries a Zacks Rank #5 (Strong Sell) with an Earnings ESP Score of -14%.


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