The US online auto market is on a heater and is gaining ground fast on legacy auto dealerships.
The global online car buying market was valued at $237.93 billion in 2020, and is projected to reach $722.79 billion by 2030, registering an annual average growth rate of 12.2% from 2021 to 2030, according to Allied Market Research.
DON’T MISS: Carvana, The “Amazon” of Used Cars
A big driver of that growth is the digital vehicle sales platform Carvana, which just reported a blockbuster first-quarter earnings report that may have auto dealership executives squirming in their heated seats.
Carvana, which specializes in used auto sales, reported a quarterly loss of $1.51 per share and an eyebrow-raising earnings boost of 19.5% against Wall Street analysts’ expectations.
Revenue losses were looking better, as well. Carvana (CVNA) – Get Free Report reported Q1 net losses of $286 million versus $806 million in Q4, 2022.
After a long period of stagnation, Carvana executives are breathing easier.
“The first quarter was a big step in the right direction and there are more steps to come,” said Carvana CEO Ernie Garcia. “Given our strong start to the year, we expect to achieve positive adjusted EBITDA in Q2 2023. It is clear our strategy and execution are working as evidenced by our 61% increase in gross profit per unit, the best first quarter GPU in company history.”
On a quarterly earnings call last week, Garcia pointed to the company’s “three-point plan”, which executives believe will lead Carvana to long-term success.
The plan focuses on stabilizing the company’s inventory and marketing numbers; increasing the company’s technology and computational capacity, and raising its operating leverage.
The plan may already be paying off as Carvana shares skyrocketed by 25% in the immediate aftermath of the March 4 Q1 earnings release. That news should be welcomed by beleaguered shareholders, who saw Carvana shares plummet by 88% over the previous 12 months, as of May 4. With the earnings news, the stock now has risen 125% on a year-to-date basis, to $10.67 per share.
Wall Street analysts say Carvana looks like it’s turned a corner.
“We continue to believe value exists in Carvana’s customer-friendly, digitally enabled model, as evidenced by continued market share gains notwithstanding the difficult industry backdrop,” William Blair stated in a recent research note.