Latest news with #ErnieGarcia
Yahoo
23-05-2025
- Automotive
- Yahoo
Used Car Stocks CVNA, KMX and AN Positioned for Tariff Tailwinds
Uncertainty surrounding tariffs has certainly thrown a wrench into the outlook for many businesses, but one industry that may experience a favorable tailwind from tariffs is used car sales. If tariffs drive up the price of new cars too much, more Americans may find they prefer to purchase a used vehicle. Let's take a look at the three most prominent stocks trafficking in used cars: Carvana (CVNA), CarMax (KMX), and AutoNation (AN), and decide which is the best opportunity for investors going forward. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter While Carvana is the upstart among this group as the newest of these companies, it's also by far the largest in terms of market value, with a massive market cap of over $65 billion. Carvana has made a splash with its splashy marketing, like its 'car vending machines,' and the convenience of having the company pick up or deliver a car right to your doorstep has won over many consumers. Carvana recently reported Q1 results, and they were impressive. The company increased retail unit sales by a scorching 46% year-over-year (with 133,898 retail unit sales) and grew revenue by 38% year-over-year to $4.23 billion. Even with this impressive growth in the rearview mirror, CEO Ernie Garcia believes the company is just scratching the surface of its potential in this fragmented space. On the company's first quarter earnings call, he explained: 'There are 40 million used cars sold yearly in the U.S. There are an additional 16 million new cars sold yearly. Adding this up and using last quarter's unit sales annualized, we are still just about 1% of this market. It's very early in the Carvana story, and we are firmly on the path to becoming the way people buy and sell cars.' There's a lot to like about Carvana, but its steep valuation gives me some pause. The stock trades for about 63x 2025 earnings estimates, which means its valuation is roughly triple that of the S&P 500 (SPX), which currently trades for 21.4x earnings. Carvana has been a significant growth stock, and I think it's a compelling success story. However, my other concern beyond valuation is that much of the low-hanging fruit has been picked — let's remember, this stock was trading for as low as $3.55 less than three years ago in December 2022, so it is nearly a 100-bagger since that time. More recently, Carvana has already been up 155% over the past year alone. The muted, limited upside by the average analyst price target illustrates this point. Among professional analysts, CVNA earns a Moderate Buy consensus rating based on 11 Buy, five Hold, and zero Sell recommendations assigned in the past three months. The average analyst CVNA stock price target of $303.57 implies almost 4% upside potential over the coming twelve months. With a market value of $10.4 billion, CarMax is much smaller than Carvana from a market value perspective, but the company is actually much larger than Carvana; in fact, it's the largest used vehicle retailer in the U.S.. In 2024, the Richmond, Virginia-based company sold over 765,000 used cars via retail and sold another 546,331 via wholesale. Carvana isn't the only company in this space that believes it has a large runway for growth ahead of it. Despite this significant scale, CarMax believes it has plenty of growth ahead, as it believes it has captured 3.7% of the market share for zero-to-10-year-old used vehicles in the U.S. and is targeting 5% market share. CEO Bill Nash says he remains 'confident in our ability to achieve further market share gains across 2025 and beyond.' CarMax is not growing as fast as Carvana, but it is growing. Revenue is growing 6.7% year-over-year to $6 billion, and retail unit sales are growing by 6.2%. One positive about CarMax is that it is quite a bit cheaper than Carvana, trading at just 17.9x forward earnings estimates. This makes CarMax significantly cheaper than its competitor, and also a bit cheaper than the broader market. Another thing I like about CarMax is that while it is not a dividend stock, it uses share repurchases to return capital to shareholders — during the most recent quarter, the company bought back $98.5 million worth of shares. KMX earns a Moderate Buy consensus rating based on 10 Buys, two Holds, and two Sell ratings assigned in the past three months. The average analyst KMX stock price target of $82.83 implies 30% upside potential from current levels. Lastly, there's AutoNation, the second-largest seller of used cars in the U.S. With a market cap of ~$7 billion, AutoNation is far smaller than Carvana and slightly smaller than CarMax from a market value perspective. Like CarMax, AutoNation isn't growing as fast as Carvana, but it's still growing, posting 4% revenue growth and $6.7 billion in sales during the most recent quarter. One key difference between AutoNation and the two aforementioned companies is that it sells new vehicles. During the most recent quarter, AutoNation posted impressive 7% same-store new vehicle sales. However, this could be a potential headwind to monitor going forward, as tariffs could push used vehicle prices higher and crimp demand. However, while acknowledging the challenges, CEO Mike Manley believes AutoNation is well-positioned to weather the storm thanks to its scale, explaining that AutoNation'will be cushioned by a cross-shopping effect,' whereby demand for lesser-impacted brands and models will supplant that for those more-affected counterparts. In this situation, we often hold both sides of the trade, not always equally weighted, but our broad portfolio of brands and models gives us an advantage here.' Manley also pointed out that the company has inventory to hold over until there is more clarity surrounding tariffs, giving the company time to adjust accordingly. AutoNation is the cheapest stock in this comparison, trading at a mere 10x 2025 earnings estimates. It is far more affordable than Carvana and CarMax and trades at just half the multiple of the broader market. While there are questions about the new vehicle market in the near term, it's hard not to like a profitable stock that is growing revenue and trading for this rock-bottom multiple. Additionally, like CarMax, AutoNation is buying back stock and repurchased $225 million worth of shares during the first quarter of 2025. AN earns a Moderate Buy consensus rating based on four Buys, three Holds, and zero Sell ratings assigned in the past three months. The average AN stock price target of $197.50 implies ~8.5% upside potential from current levels. All three companies bring distinct strengths to the table. Carvana is a notable turnaround story that has captured significant investor attention and may still offer meaningful long-term growth potential. That said, with the stock currently trading at approximately 65x forward earnings estimates—versus 17.9x for CarMax and 10x for AutoNation—the valuation presents a challenge from a risk-adjusted return standpoint. CarMax and AutoNation both stand out for their robust operational scale, steady revenue growth, and comparatively attractive valuations. Operating within a fragmented industry, each also benefits from opportunities to expand market share while returning value to shareholders through substantial share repurchase programs. Of the two, I have a more favorable outlook on AutoNation, primarily due to its especially compelling valuation, which I believe already accounts for potential headwinds in the new vehicle market. Disclaimer & DisclosureReport an Issue
CNBC
20-05-2025
- Automotive
- CNBC
Carvana CEO on how the "car vending machine" began
Carvana Founder and CEO Ernie Garcia takes the stage at the CNBC CEO Council Summit to discuss the beginnings of the company and its iconic "car vending machines."
New York Times
13-05-2025
- Automotive
- New York Times
Why This Used Car Company Thinks Tariffs Could Be Good for Business
Automakers are worried that President Trump's tariffs on imported cars and auto parts will soon increase their costs and start eating into profits. But at least one business in the auto industry thinks the tariffs could give it a lift. That company is Carvana, an online retailer of used cars that has gained fame for storing vehicles in distinctive 'vending machine' towers. The Trump tariffs, which include levies of 25 percent on vehicles made in Mexico, Canada, Germany and many other nations, are widely expected to raise the prices new cars and trucks, forcing more car shoppers to opt for a used vehicle. An agreement to lower tariffs on Chinese imports that the administration announced on Monday will not change the tariffs on cars and auto parts. 'To the extent that car prices go up, Carvana is probably positioned to be relatively advantaged as consumers look for high-quality cars at a lower price,' the company's founder and chief executive, Ernie Garcia, said in an interview last week. 'We think that will cause them to shift into used vehicles and into the savings that are available via online buying.' Mr. Trump has said he imposed tariffs in hopes of forcing manufacturers to make more goods and create more factory jobs in the United States, although he has also claimed that tariffs would help achieve other goals like reducing unauthorized immigration and drug smuggling. Automakers are bracing for the impact. In the past several days, General Motors said the tariffs would increase its costs by $2.8 billion to $3.5 billion this year, even accounting for measures the company is taking to adapt. Ford Motor, which makes more vehicles domestically than G.M., estimated the tariffs would cost it $1.5 billion on a net basis. Toyota Motor, which imports many vehicles from its home country of Japan, said the tariffs would cost it $1.3 billion in March and April alone. Analysts have predicted that the prices of some imported vehicles could rise by up to $10,000, and that sales of new vehicles could slow sharply this year. Alan Haig, whose consulting firm in Fort Lauderdale, Fla., advises car dealers, said Mr. Garcia was on the right track about how consumers were likely to react. 'I think you're going to see an increase in used car sales because of the tariffs, and I do think there will be more customers visiting Carvana websites because that's essentially their sole focus,' he said. But there could also be a downside. If the tariffs cause a recession, or vehicle prices rise too much, sales of both used and new automobiles could decline. Already, used cars sell for about $1,000 more in auctions, on average, than just two months ago. Mr. Haig said it would take some time for the full impact to be felt. The prices of most vehicles on dealer lots haven't increased significantly, yet. The first batches of imported models affected by the tariff on vehicles, which went into effect in early April, are just starting to arrive. Tariffs on imported engines, transmissions and other components went into effect on May 3. Whatever happens next, Carvana is on much sounder financial footing than it was just a couple of years ago. When the Covid pandemic set off a boom in used car sales and online buying, Carvana became a favorite of investors, and its stock soared. But as demand softened, the company was left holding a large inventory of vehicles purchased at relatively high prices, and it began losing a lot of money. At the same time, interest rates rose after Carvana had taken on billions of dollars in debt to buy Adesa, a used car auction company. Because of the heavy debt load and mounting losses, some analysts feared Carvana might not survive. By February 2023, its stock had crashed. But Mr. Garcia was able to renegotiate its debt, reduce costs and streamline Carvana's operations. Over many months, the company cut jobs, sold off cars and turned Adesa into a provider of affordable cars and trucks. More recently it has built up facilities at 11 Adesa locations to repair and recondition used vehicles. The work is now paying off. Last week, Carvana reported record results for the first three months of the year, with profits of $373 million, up from $49 million a year earlier. It sold 133,898 used vehicles, 46 percent more than in the first quarter of 2024. Average gross profit on each vehicle was just under $7,000. The company accomplished this while keeping fewer cars in its inventory, spending less on advertising and employing about 4,000 fewer people than it did three years ago. Its stock has recovered much of the ground it lost. 'From 2017 to 2021, the company focused on growth,' Mr. Garcia said. 'We spent the last two years unlocking efficiencies. I think that is what has driven the dramatic improvement in our performance.' Mr. Garcia is now aiming, within five to 10 years, for Carvana to sell three million cars and trucks annually, from about 500,000 now. Many Wall Street analysts are again confident about the company's prospects, but see at least one hurdle. Auto mechanics are very hard to find, and Carvana needs hundreds more to reach its goal of fixing up used cars for sale. 'Labor is the key bottleneck,' Ronald Josey, a Citi analyst, wrote in a recent report. Mr. Garcia said he was confident about Carvana's business now that it had restructured its operations, and he thinks it can do well regardless of how U.S. trade policy changes. 'I think it's now proven that, yes, customers have shown they are willing to buy cars online, and an online business model can deliver value,' he said.
Yahoo
10-05-2025
- Automotive
- Yahoo
Why Carvana Stock Popped Today
Carvana posted strong growth on the top and bottom lines in the first quarter. Management is aiming to sell 3 million vehicles annually in the next five to 10 years. The company thinks the used car market will be relatively insulated from tariffs. 10 stocks we like better than Carvana › Shares of Carvana (NYSE: CVNA) were moving higher today after the online used car retailer delivered strong results in its first-quarter earnings report, easily beating estimates and tamping down concerns about an impact from tariffs. As of 2:41 p.m. ET, the stock was up 12.4% on the news. Carvana reported a 46% increase in unit growth in the quarter to 133,898 vehicles, leading to revenue of $4.23 billion, up 38% from the quarter a year ago and ahead of estimates at $4 billion. Profitability remained strong as adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) more than doubled to $488 million, and the company reported net income of $373 million, or $1.51 per share, up from $0.23 in the quarter a year ago and beating the consensus at $0.75. Carvana outgrew industry peers in the quarter, and CEO Ernie Garcia touted the company's growth prospects, saying, "We are incredibly well positioned for the path ahead and have very clear visibility to even stronger financial performance, much larger scales, and even better customer experiences." He also said that tariffs would have a greater impact on new car prices than used car prices. Carvana said it expected units sold and adjusted EBITDA to increase sequentially, though it didn't give specific figures. It also said it's on track to deliver significant growth in units sold and adjusted EBITDA for the full year. Finally, it gave new long-term guidance calling for 3 million retail units per year at an adjusted EBITDA margin of 13.5% in the next five to 10 years. With a target like that, Carvana has its sights squarely on growth. The used car market is massive, and Carvana is executing well just a little more than two years after nearly falling into bankruptcy. Based on that guidance, there's still plenty of upside potential for the stock, though it is pricey. Before you buy stock in Carvana, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Carvana wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $623,103!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $717,471!* Now, it's worth noting Stock Advisor's total average return is 909% — a market-crushing outperformance compared to 162% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 5, 2025 Jeremy Bowman has positions in Carvana. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Why Carvana Stock Popped Today was originally published by The Motley Fool
NBC News
08-05-2025
- Automotive
- NBC News
Carvana's record quarterly results top Wall Street expectations
DETROIT — Carvana's first-quarter results easily topped Wall Street's expectations as the company reported record sales driven by higher-than-expected industry demand amid fears of price increases due to automotive tariffs. Carvana CEO and co-founder Ernie Garcia loosely addressed potential impacts of tariffs on the business, saying the company experienced 'little gyrations' of demand that have since leveled off. He downplayed the idea that the levies would have any material impact on its business that the company can't handle. 'I don't think we have too much interesting there,' Garcia said Wednesday during the company's quarterly call, adding that pricing may increase and could potentially be beneficial for used car sales. While the tariffs of 25% on new imported vehicles and many parts do not directly impact used car sales, changes in new vehicle prices, production and demand affect the used car market. 'To the extent new car prices go up, I think generally that would also pull up used car prices, but less. I think that would likely drive a substitution into used, which we expect would be positive,' Garcia told CNBC's 'Squawk Box' Thursday. 'I think the sum of that is unclear — how that adds up, and is that a net positive or negative for us.' A closely watched barometer for used vehicle pricing jumped last month to its highest level since October 2023 as dealers and consumers rushed purchases amid fears of price hikes due to auto tariffs, Cox Automotive reported earlier Wednesday. Here's how the company performed in the first quarter, compared with average estimates compiled by LSEG: The online used vehicle retailer reported a 46% increase in year-over-year sales during the first three months of the year to nearly 134,000 units. Carvana also reported records of net income of $373 million; adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $488 million; and operating income of $394 million. The company said its net income benefitted from roughly from $158 million associated with positive changes in the fair value of its warrants to acquire common stock of Carvana partner Root auto insurance. Revenue of $4.23 billion was up 38% year over year from $3.06 billion. Carvana, which doesn't typically provide detailed annual targets, on Wednesday also updated its long-term objectives and quarterly guidance. Its second-quarter guidance includes a 'sequential increase in both retail units sold and adjusted EBITDA,' while the new 'management objective' is to sell 3 million retail units per year at an adjusted EBITDA margin of 13.5% within five to 10 years. 'We are incredibly well positioned for the path ahead and have very clear visibility to even stronger financial performance, much larger scales, and even better customer experiences,' Garcia said in a release. Garcia told investors the goal is 'very exciting and very achievable,' while noting that the company will prioritize 'growth over margin within reasonable margin ranges.' The company's return to growth comes several years after concerns that Carvana was close to bankruptcy as it focused on growth and mismanaged inventories during the coronavirus pandemic in 2021 to 2022. Since then, the company has benefitted from a years-long restructuring to lower costs and increase efficiency, including shares of the company increasing roughly 27% this year.
