Carvana Shares Up 70.70% In1 Month After Big Reversal Of Fortunes

This one is a reversal of fortunes that had gone a little under the radar, when out of the ashes of a potential bankruptcy, Carvana stock price (NYSE: CVNA) has really started motoring back, adding 70% in the last month of trading, and more than 900% in the last 12 months. With the stock now back at 2 year highs, we take a look at some of the recent numbers.

Steering through rough financial waters is no easy task and in recent years, Carvana, the online used car retailer, has shown signs of recovery that have made market watchers pay closer attention. The journey back from near bankruptcy has not been an easy one.

In a stark turnaround from the previous year, Carvana reported net income of $49 million in the first quarter of the most recent year, compared to a $286 million loss. This profitability is a vital sign for investors that the company's strategies may be yielding positive results. Other Q1 headlines include revenues of $3.06bn against a consensus expectation of $2.67bn and 91,878 retail units sold.

“In the first quarter, we delivered our best results in company history, validating our long-held belief that Carvana's online retail model can drive industry-leading profitability while delivering industry-leading customer experiences. We reached new Q1 milestones for all key profitability metrics while also growing 16% year over year.”

Carvana statemement

As Carvana operates in a fragmented used car retail market, there remains potential for growth. The company's aim to further improve efficiency and offer more benefits to online consumers holds promise. A successful implementation of these strategies could lead to increased sales volume and market share.

The company's notable cost-cutting measures have resulted in the reduction of over $1.1 billion of annualised selling, general, and administrative (SG&A) expenses. Additionally, the restructuring of its debt has saved the company roughly $430 million in annual interest expenses. A slash in overhead and interest costs is pivotal for the company's path to a more sustainable business model.

Analysts Singing Different Tune

In the last month, analysts covering Carvana have been busy, with no fewer than 12 upward revisions in price targets. Jefferies were the latest of which to upgrade their target (to $125 from $80) whilst keeping a ‘hold' rating on the stock, reversing the downward revision filed in advance of the latest quarterly numbers.

Despite this large swathe of analyst moves, the consensus price target on the stock still sits below the current trading price, with a $98.08 target sitting against a current price just shy of $120. It can be easy to get carried away in the momentum and movement of stock prices, but these do not always tell the full story operationally.

Whilst holders of the stock will no doubt be a lot happier than they were this time last year, you will always need to do your full checks on the fundamentals and detailed analysis before making your own personal decision. Everyone loves an underdog story however, and this particular tale of a firm rising out of the ashes so rapidly back to favour is one to cherish for watchers and participants alike.