It's starting to look like Carvana (CVNA 6.05%) stock is going to survive its near-death experience.
One year ago, Carvana wrapped up its worst year ever, losing $1.6 billion despite booking a record $13.6 billion in sales. Burdened with $6.1 billion in long-term debt, and another $1 billion in long-term lease obligations, this used car dealer's future looked grim. One year later, however, Carvana stock has soared 10x in value. (By the way, did you know that one of my colleagues predicted exactly this?)
How'd it do that? According to J.P. Morgan analyst Rajat Gupta, Carvana has a secret weapon, and it's this tool that could lift Carvana to $180 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) when it reports earnings next month.
Is Carvana stock a buy in 2024?
Writing on StreetInsider Thursday, Gupta laid out his buy thesis on Carvana. In a market still restocking its supply of used cars, Carvana benefits from "partner inventory" from the likes of Vroom, Hertz, and multiple companies that are in the process of "de-fleeting," which gives it access to used car inventory that its rivals lack.
These advantages, says Gupta, will help Carvana surprise Wall Street by reporting EBITDA nearly 50% above current consensus estimates when it reports first-quarter results next month. And not just next month. EBITDA for all of 2024 could soar as high as $650 million, and grow to $725 million next year.
But is that enough to make Carvana stock a buy? I'm actually not convinced it is. (And neither is Gupta. He rates the stock only neutral, after all.) EBITDA or no EBITDA, Carvana is still expected to lose money on the bottom line this year. It's actually expected to keep losing money for the next three years. And at $8.3 billion in market cap, Carvana stock costs a staggering 56.5 times projected 2027 earnings.
Carvana may no longer be headed for the scrap heap. But it's the farthest thing from a value stock.
