How Carvana Stock Surged 40% After Posting Their First Ever Annual Profit

Used car online marketplace Carvana had reason to celebrate on Thursday as they revealed they achieved their first ever annual net profit, sending their Carvana stock surging by as much as 40%. The company’s CEO Ernie Garcia was eager to emphasize to analysts that despite facing immense pressures over the last couple years, they “didn’t disintegrate” and were able to persevere.

For the full year 2023, Carvana posted a net income of $150 million which was aided by progress reducing their debt load. Looking ahead, management guided for a slight year-over-year increase in retail units sold in the current quarter along with an adjusted core profit forecasted to come in “significantly above $100 million.” This upbeat guidance helped lift Carvana stock significantly higher.

How Did Carvana Achieve Profitability?

To achieve this turnaround, Carvana has been laser focused on achieving profitability and restructuring their debt in the short-term even if it meant slowing top-line growth. In 2022, the company announced workforce cuts to trim costs and preserve cash as they battled rising interest rates and a cooling used car market. Their strategy of prioritizing the bottom line over growth appears to have paid off with analysts and investors rewarding the stock following the announcement of annual net income.

While some remain skeptical due to ongoing economic uncertainty, most analysts upgraded their rating and price target on Carvana stock after the results. If the company can continue demonstrating they have reached consistent profitability while resuming unit sales growth, it could help validate their business model and provide optimism that recent stock price gains are justified. Only time will tell if Carvana can sustain these results, but investors are celebrating for now that the company avoided disintegrating during a challenging period.