Carvana CEO Believes Tariffs Could 'Benefit' Used Cars As It Achieves Long-Term Profitability Goal Years Ahead Of Schedule

Used car retailer Carvana Co. CVNA reported better-than-expected first quarter results, and the company’s CEO hinted that tariffs could be beneficial for used cars going ahead.

What Happened: Carvana achieved its long-term profitability goal years ahead of schedule as the company reported an 11.5% adjusted EBITDA margin during the first quarter, hitting a target projected in 2018 for a much later stage.

Company CEO Ernie Garcia highlighted that during its 2018 Analyst Day, their analysis projected “a long-term EBITDA margin range of 8% to 13.5% at a time when our actual adjusted EBITDA margin was negative 9%.”

“For the last four consecutive quarters, we have been in that range. And in Q1, in a seasonally weaker quarter, we were reporting 11.5%,” he said.

While acknowledging that tariffs could drive up new car prices, Garcia said that used car prices could be less affected.

“It may be a directional benefit to used cars. And it may be a benefit to business models that are able to offer value to consumers, which is a business model that we think we fit in that box,” said the CEO.

Why It Matters: Carvana significantly outperformed Wall Street’s expectations in the first quarter, reporting revenue of $4.23 billion against a consensus estimate of $3.98 billion. The company’s earnings per share also soared past predictions, reaching $1.51 compared to the anticipated 60 cents.

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According to data from Benzinga Pro, Carvana has surpassed analyst estimates for both its top-line and bottom-line results for the past five consecutive quarters.

Carvana expects sequential growth in both retail units sold and adjusted EBITDA in the second quarter, anticipating new records. The company remains on track for significant growth in fiscal year 2025.

The shares have risen by 29.87% on a year-to-date basis and 126.51% over a year. On Wednesday, the shares ended at $259.17 apiece and rose by 3.02% in after-hours. Meanwhile, the SPDR S&P 500 ETF Trust SPY, tracking the S&P 500 index, rose 0.42% in the same session.

Benzinga Edge Stock Rankings shows that CVNA had a strong price trend over the short, medium, and long term. Its momentum ranking was solid at 96.27th percentile, whereas its value ranking was also poor at 9.29th percentile; the details of other metrics are available here.

On Thursday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 were higher in trade.