Carvana Pre-Q2 Earnings Analysis: Buy, Sell or Hold the Stock?

Core Insights - Carvana (CVNA) is expected to report second-quarter 2025 results with earnings estimated at $1.10 per share and revenues at $4.56 billion, reflecting a year-over-year earnings growth of 685.7% and a revenue increase of 33.6% [1][2] Financial Performance - The Zacks Consensus Estimate for Carvana's 2025 revenues is $18.1 billion, indicating a 32.3% year-over-year rise, while the EPS estimate is $5.04, suggesting a 217% increase year-over-year [2] - For Q2 2025, adjusted EBITDA is projected to grow nearly 48% year-over-year to $524.2 million, driven by strong sales and cost-efficiency improvements [6][10] Sales and Market Position - Carvana's retail sales have shown significant momentum, with a 46% year-over-year increase in retail unit sales in Q1 2025, and an expected 33.8% growth in Q2 2025, with approximately 135,750 vehicles anticipated to be sold [4][5] - The company has sold over 100,000 vehicles for four consecutive quarters, maintaining its position as the second-largest used car retailer in the U.S. [4][11] Cost Management and Efficiency - Carvana's turnaround strategy includes cutting expenses through improved technology, leaner staffing, reduced advertising, and better inventory management, which are enhancing efficiency and profitability [5][10] - The adjusted EBITDA margin has reached 11.5%, leading the public auto dealer sector due to effective cost management [10] Valuation and Market Performance - Year-to-date, Carvana's shares have surged 60%, outperforming competitors like CarMax and Sonic Automotive [7] - Carvana trades at a forward 12-month price-to-sales ratio of 3.38, significantly higher than CarMax (0.32) and Sonic Automotive (0.17), reflecting stronger growth expectations [8] Strategic Growth Opportunities - The acquisition of ADESA U.S. has bolstered Carvana's logistics and vehicle processing capabilities, providing room for growth despite holding only about 1% of the market share [11]