Carvana stock skyrockets, reports first ever profitable year
Carvana (CVNA) shares surge after the online used car retailer reported its first profitable year in its fourth-quarter results. Yahoo Finance Senior Reporter Ines Ferré examines Carvana's quarterly results — "We didn't disintegrate,” Carvana Chairman and CEO Ernie Garcia said on the earnings call — and its stock movement ahead of Friday's close.
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Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
SEANA SMITH: The shares are surging today. Lots of excitement surrounding this latest results. You can see it up just about 42% reporting its first ever annual profit. Now the rental car company also posting a fourth quarter loss that narrowed from a year earlier. Now, this coming after Carvana issued a turnaround plan last summer that included a deal with bondholders trimming expenses and clearing some of its inventory. So I guess in terms of shareholders, investors' eyes right now, it's in a better position than it had been in the past.
But still a long list of challenges ahead here. For this company, it's likely going to continue burning cash this year. It's got a large amount of debt. So that leaves the company really on the hook for those large interest payments. Also really the need to cut and control their costs. And Jefferies, one of the analysts out this morning that poured a bit of cold water on some of the excitement-- or optimism, I should say-- saying that, yes, the guidance was impressive.
But still, that long-term visibility remains very low.
BRAD SMITH: Yeah. They are not seeing that visibility that they'd like to-- into that long-term profitability. They point back to the GPU. Now if you're thinking of NVIDIA, and of course, all of the fanfare around this week has been, you wouldn't be wrong to think that its graphics processing units it's not-- it's the gross profit per unit in this Carvana case here. They believe that GPU, that gross profit per unit in recent quarters has benefited from transitory tailwinds that may reverse once Carvana returns to more aggressive growth.
Now for where it stands right now, total gross profit per unit, the GPU of about $5,730. That more than doubled year over year was actually about 4% above consensus as well. And they said that that's driven by about 22.5% upside to the retail GPU here. So ultimately it's going to come back to where more of that visibility starts to exist within that long-term profitability and comes back to the GPU.
