(Reuters) – Carvana shares rose about 30% in after-hours trading on Wednesday after the used car retailer forecast unexpected increases in retail sales and core profits for the current quarter.
Carvana’s results come as high interest rates prompt consumers to look for deals on used cars instead of buying new ones.
The company’s stock, which has a short-term yield of 27% of its free float, is up about 65% this year after rising 11x last year.
The soaring share price is expected to increase the company’s market capitalization by about $5 billion to $17.6 billion as of Wednesday’s close.
The used car retailer said analysts expect retail sales to decline 2.6% year-on-year, while second-quarter adjusted core profit and retail segment growth are expected to continue increasing.
Revenue for the first three months of this year was $3.06 billion, beating analysts’ expectations of $2.89 billion, according to LSEG data.
“Sales were much better than expected, but spending was flat. That’s a big upside surprise,” said Douglas Arthur, an analyst at Huber Research Partners.
First quarter adjusted earnings before interest, taxes, depreciation and amortization of $235 million exceeded capital expenditures and interest expense. Analysts had expected adjusted core profit to be $135.9 million.
The company’s first-quarter profit was $49 million, compared to analysts’ expectations of $31.2 million, according to LSEG data.
According to market research firm Cox Automotive, the total number of unsold used cars supplied by dealers across the U.S. in March was 2.27 million units, an increase of 9% from the same month last year.
Last month, Carvana’s rival CarMax said its fourth-quarter results fell short of analysts’ expectations and that it may miss long-term auto sales goals.
(Reporting by Akash Sriram in Bengaluru; Editing by Anil D’Silva)
