Carvana (NYSE: CVNA) stock price has risen from the ashes, becoming one of the best performing companies in Wall Street. It jumped by more than 30% in the pre-market session, reaching a high of $121.7, its highest level since April 2022. It has soared by over 3,600% from its lowest point in 2022.
Spectacular comeback continuesCarvana has had a spectacular comeback in the past 14 months, leading to a short squeeze that has cost short sellers over $4 billion in paper losses. It is still one of the most shorted companies in the US with a short interest of over 30%.
Carvana’s recovery has surprised many, including me, who predicted that the company would go bankrupt as its debt surged. The past few months have been intense for the management, who have repositioned the company for profitable growth. Gone are the days of growth at all costs.
As a result, Carvana’s revenue growth has been great while the management has worked to solve its debt issues. On Wednesday, the company said that its revenue rose by 17% in Q1 to $3.06 billion. It sold 91,878 vehicles, a 16% YoY increase.
Carvana has also moved from being a cash incinerator to one that is making profits. Its net income in the quarter rose to $49 million while its adjusted EBITDA rose to $235 million. Most importantly, the company is now making money for each vehicle it sells. Gross profit per unit rose to $6,432, up from a loss of over $7,000 in 2022.
Therefore, there is a likelihood that the company will continue firing on all cylinders as the management focuses on profitability. As such, it will continue gaining market share against traditional companies like AutoNation, Penske Automotive, and Lithia Motors.
Carvana’s valuation has also improved recently. The company has a market cap of over $18 billion, compared to Carvana’s estimated 2024 revenue of $11 billion. Analysts expect that the firm will make over $12 billion in 2025.
The company is also growing its profits. It has made a TTM net profit of over $450 million and the company expects that its margins will continue in the coming years.
Further, Carvana still has room to grow market share. For one, over 40 million vehicles are sold in the US each year and Carvana has just market share of about 1%. I believe that it could gain its market share to about 5% in the next few years.
Carvana stock price forecast
Turning to the daily chart, we see that the CVNA stock price formed a golden cross pattern in November last year. In most cases, this is one of the most bullish patterns in the market. It has remained above the 200-day and 50-day moving averages since then.
Carvana’s shares rose above the 23.6% Fibonacci Retracement level after earnings. It has moved above the ascending trendline shown in black. The stock has moved above the key resistance at $93.1, its highest point in April.
Therefore, the outlook for the stock is extremely bullish, with the next point to watch being the 50% retracement point at $190. This price is about 57% above the Thursday’s opening of $121.
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