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Citi reiterated a Neutral rating on Carvana (NYSE:CVNA) and doubled their price target on the stock to $11.00 (From $5.50) after the company reported 4Q earnings results last week.
Carvana reported 4Q22 revenue 8% below consensus as retail unit sales declined 23% Y/Y and adj. EBITDA loss of $(291M) versus consensus of $(203M). Citi analysts wrote in a note that “Although the broader market appears to be stabilizing, management is focused on achieving positive FCF over time, beginning with positive adj. EBITDA through cost reductions and GPU improvements.”
Management expects a modest sequential reduction in total Retail units sold from 4Q22’s 87K. This compares to consensus expectations of ~92K units in 1Q. Carvana noted that it had sold ~5,600 units in the first seven weeks of 1Q and that typical increase in unit sales in March is likely to be muted given lower inventory, staffing, and advertising. Carvana also expects 1Q GPU to increase sequentially from 4Q22 and plans to remove ~$100 million in quarterly non-GAAP SG&A expense by 2Q versus 4Q22.
The analysts also wrote in the note, “Following CVNA’s 4Q22 results and outlook, we are adjusting our projections. We are lowering our revenue and unit projections for 2023 and beyond given expectations for a sequential decline in retail units in 1Q as management continues to focus on profitability over growth. Our 2023 revenue and unit projections decline -35% and -37%, respectively. We now expect 2023 adj. EBITDA loss of $(668) million from $(392) million previously.”
Shares of CVNA are up 1.50% in pre-market trading on Monday.
