Carvana reclaims the automotive market: From near bankruptcy to stock market star

Carvana investors have experienced a true rollercoaster ride over the past few years. The used car dealer, known for its car vending machines, was on the brink of bankruptcy in December 2022. The stock price plummeted by 98% to a value of about 400 million US dollars. Since then, the stock has made a remarkable leap of over 7,000% and now reaches a valuation of 52 billion US dollars. The latest quarterly report shows that the company has achieved new records. In the third quarter, Carvana reported a record-breaking adjusted EBITDA of 429 million US dollars on revenue of about 3.7 billion US dollars, significantly surpassing Wall Street expectations. Simultaneously, the total number of cars sold in the quarter rose by 34% to 108,651 units. Carvana shares shot up by about 22% following the positive results and were trading at 248.82 US dollars as the market approached the closing bell. "The extraordinary results from Carvana underscore our position as the fastest-growing and most profitable automobile retailer," stated CEO Ernie Garcia. It is a remarkable turnaround for a company that investors virtually wrote off two years ago when it fell into a credit crisis due to an overwhelmed balance sheet and a weakening consumer market. Moreover, financing options dried up as the Federal Reserve aggressively raised interest rates in 2022 and 2023. Carvana successfully resisted creditors, including Apollo Global Management, convincing them to accept a 1.3 billion dollar discount on their poorly rated bonds, while the company cut costs and right-sized the business. The tremendous effort led by CEO and founder Ernie Garcia has paid off, and it seems that Wall Street is now rapidly catching up with the Carvana story. More than ten Wall Street firms raised their price targets for the company on Thursday following the solid results. According to Bloomberg data, Carvana's average price target is around 200 US dollars, still below the stock price of 255 US dollars at which the stock traded on Thursday afternoon, leaving room for potential future increases. JPMorgan raised its price target for the stock to 300 US dollars and reaffirmed its "Overweight" rating in a note on Thursday.