Carvana Co. (NYSE:CVNA) shareholders are probably feeling a little disappointed, since its shares fell 8.5% to US$185 in the week after its latest third-quarter results. It looks like the results were pretty good overall. While revenues of US$1.5b were in line with analyst predictions, statutory losses were much smaller than expected, with Carvana losing US$0.10 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the 20 analysts covering Carvana are now predicting revenues of US$7.92b in 2021. If met, this would reflect a major 63% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 43% to US$1.35. Before this latest report, the consensus had been expecting revenues of US$7.90b and US$1.42 per share in losses. So there seems to have been a moderate uplift in analyst sentiment with the latest consensus release, given the upgrade to loss per share forecasts for next year.
There's been no major changes to the consensus price target of US$228, suggesting that reduced loss estimates are not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Carvana at US$270 per share, while the most bearish prices it at US$80.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Next year brings more of the same, according to the analysts, with revenue forecast to grow 63%, in line with its 56% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 9.1% next year. So although Carvana is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$228, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Carvana analysts - going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Carvana (1 is concerning!) that you need to be mindful of.
When trading Carvana or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.