Is Carvana Stock a Buy, Hold or Sell After Earnings Rally?

Carvana ( CVNA ) stock is popping Thursday after the used car retailer reported a surprise profit for its second quarter and topped revenue expectations.

In the three months ended June 30 , Carvana's revenue increased 14.9% year-over-year to $3.4 billion, driven by a 32.5% year-over-year increase in retail units sold to 101,400. Its earnings per share swung to 14 cents from a per-share loss of 55 cents in the year-ago period.

"Carvana's second quarter results clearly demonstrate the differentiated strength of our customer offering and business model," said Carvana CEO Ernie Garcia in a statement. In addition to leading the industry in retail unit growth, CVNA's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin set "an all-time high water mark for public automotive retailers," he added.

The results handily easily analysts' expectations. Wall Street was anticipating revenue of $3.2 billion and a loss of 7 cents per share, according to CNBC .

For the rest of the year, Carvana said it anticipates "a sequential increase in retail units in Q3 compared to Q2" and "adjusted EBITDA of $1.0 to $1.2 billion for the full year 2024, an increase from $339 million last year."

Is Carvana stock a buy, sell or hold?

It wasn't even two years ago that Carvana appeared to be on the brink of bankruptcy . But in 2024, the consumer discretionary stock has been one of the best performers on the price charts, up more than 200%.

Analysts have had a tough time keeping up with CVNA's quick ascent. According to S&P Global Market Intelligence , the average analyst target price for CVNA stock is $125, which is about 20% below current levels. Additionally, the consensus recommendation is Hold.

Still, there are some on Wall Street that have taken note of the sizzling stock. Financial services firm Needham has a Buy rating on Carvana and lifted its price target on the stock to $200 from $160 after earnings.

"CVNA is proving out the original bull thesis on the stock, with their unique industry positioning and physical and technology moats set to drive a long runway of share gains, while leveraging improved internal processes to drive industry leading gross profits per unit," Needham analyst Chris Pierce said in a note this morning. "The next leg of CVNA's growth is profitable unit growth, with commentary on the path forward in retail GPU also indicative of a stronger tilt towards a unit growth posture."

Needham's $200 price target represents implied upside of nearly 40% to current levels.

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