Shares of the online car-buying company Carvana (NYSE: CVNA) surged higher this week after the company reported first-quarter results that were better than expected, and as the company said it would adapt to any potential effects from tariffs.
Carvana’s stock was up by 8.2% this week, according to data compiled by S&P Global Market Intelligence.
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Adapting to tariffs during a strong quarter
Carvana reported revenue of $4.2 billion in the first quarter, a 38% increase from the year-ago quarter, and ahead of Wall Street’s consensus estimate of $3.9 billion. The company’s earnings per share of $1.51 spiked from just $0.23 in the year-ago quarter and easily outpaced analysts’ average estimate of $0.67 per share.
Carvana CEO Ernie Garcia said in prepared remarks, “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.”
The company’s retail unit vehicle sales were up 46% from the year-ago quarter, reaching a new company record of 134,000. Carvana’s management noted that the company is now selling 35% more cars per Carvana employee compared to the company’s previous retail unit record.
Investors were no doubt waiting to hear what management had to say about the potential impact of tariffs on the company and management said on the call that Carvana’s business model is flexible enough to adapt to any changes.
Our system inherently adapts to what it sees. So if customers start to prefer less expensive cars, we’ll automatically start buying less expensive cars. If the reverse is true, then we’ll react in the opposite way. I think we’ve seen little gyrations over the last month or so. I think when tariffs were first announced, we saw a small pull forward of demand and we reacted accordingly.
Management expects more growth
Carvana’s management said the company is targeting 3 million annual retail sales within the next five to 10 years. For reference, Carvana sold just over 416,000 units in 2024. To help reach that goal, Carvana has plans to expand its retail footprint, expanding its production capacity from 23 to 60 locations over that period.
With such a strong quarter and plans for the company to expand its operations, it’s not surprising to see Carvana’s shares making gains this week. But with the company’s share price up 143% over the past year and an uncertain economic situation developing in the auto industry, investors may want to temper some of their expectations.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
