What happened
Shares of Carvana (CVNA -2.73%) exploded last year as the used-car dealer continued to post blowout revenue growth aided by its unique vending-machine model that has won over customers. The stock also seemed to get a benefit from a short squeeze, as short-sellers have repeatedly been forced to buy back the stock. According to data from S&P Global Market Intelligence, the stock finished up 181% in 2019, following a 71% jump in 2018.
The chart below shows the stock's path.
So what
After trading flat for the first few weeks of the year, Carvana stock began to take off after its fourth-quarter earnings report at the end of February. The company reported another round of blockbuster growth, with revenue up 121% to $584.8 million, marking its 20th straight quarter of triple-digit revenue growth. The stock rose 7.3% on the news and marched higher over the following weeks as the company made a move that allows it to resell its loans and opened up in a number of new markets.
Image source: Carvana.
A short squeeze also seems to have contributed to the stock's gains through March and April, as the money-losing company has been popular with short-sellers. Currently, 53% of the stock is sold short, which helps explain its volatility. The stock pulled back in May as its first-quarter report wasn't enough to keep the rally going in spite of revenue jumping 110% to $755.2 million, and fell again later that month when the company announced a secondary offering.
After trading mostly flat for the next two months, shares spiked on a strong second-quarter report in the beginning of August as revenue easily beat estimates at $921.2 million, surging 108% to $986.2 million. The report showed the company's blistering growth continuing, bucking expectations of a slowdown.
Shares fell in September on a broad-based sell-off in growth stocks as the WeWork IPO collapsed, but then Carvana finished the year on a strong note, as it rebounded from an initial sell-off on its third-quarter earnings report, which included 105% revenue growth to $1.095 billion, its 23rd straight quarter of triple-digit revenue growth.
Now what
Carvana comes into 2020 with the stock still heavily bet against and the company is on track to lose more than $100 million in 2019. However, a company that has reported 23 consecutive quarters of triple-digit revenue growth and surged 732% since its 2017 IPO is clearly resonating with car buyers. Carvana's growth has to slow down eventually, but the company believes it can reach annual sales of more than 2 million cars annually, up more than 10 times what it's doing today.
While the stock is unlikely to triple again this year, as Carvana is now worth $14 billion, keep your eye on the top line, since that is likely to dictate the stock's trajectory going forward.
