Shares of Carvana (NYSE:CVNA), a used car e-commerce retailer, jumped over 23% Thursday afternoon after the company reported a mixed second-quarter result due to COVID-19 but also reported the strongest demand management has seen toward the end of the quarter.
Carvana reported a 25% increase in retail units sold, which drove revenue up 13% to $1.1 billion, compared to the prior year's second-quarter, checking in slightly below Wall Street's estimates. Carvana's bottom line checked in with a net loss of $0.62 per share, which was better than analysts' estimates calling for a $0.77 per share loss. While those top- and bottom-line results are important for investors, what's likely driving the stock higher today is a mix of historically strong demand for Carvana's vehicles at the end of the quarter and the belief that consumer car-buying habits have accelerated toward e-commerce due to COVID-19. "We've been leading the market with The New Way to Buy a Car™ for the last 7 years and now with even more customers moving to online buying, we are seeing more demand than ever before," said Ernie Garcia, founder and CEO of Carvana, in a press release.
While COVID-19 has had tragic impacts on much of the economy and consumers, Carvana is one of the few companies that has fared well. Sales initially declined but began to rebound as soon as April and continued through July. However, investors need to understand that while demand is historically strong, sales and financials will be choppy in the near term simply because COVID-19 has disrupted purchasing operations and has constrained inventory. It could be a bumpy ride until COVID-19 is under control, but Carvana is uniquely positioned to thrive and take advantage of shifting consumer-purchasing behaviors.