Carvana (NYSE: CVNA) is poised to release its third-quarter earnings results after the market closes on Wednesday, and anticipation is building as the stock has been on an upward trajectory. On Tuesday, shares climbed by 2%, although they remain approximately 8% below their all-time high reached earlier this year. The company’s explosive growth over the past three years, with a staggering increase of roughly 2,390%, highlights its transformation from facing bankruptcy concerns to enjoying significant sales and earnings momentum.
However, Carvana remains a contentious stock in the market. Notable short seller Jim Chanos recently raised alarms regarding the company’s future, pointing to potential risks in the subprime auto-lending sector and warning of increasing defaults and bankruptcies. He referenced the collapse of Tricolor Holdings, suggesting that pressures in the automotive market could adversely affect Carvana’s valuations.
In contrast, CNBC’s Jim Cramer expresses a bullish outlook for Carvana, confidently asserting that the company is set to “blow the doors” off expectations in its upcoming earnings report. Cramer believes that the business’s momentum will translate into impressive results. Carvana’s previous quarterly update indicated it expected an increase in retail units sold, along with non-GAAP adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) projected between $2 billion and $2.2 billion for the year. Analysts are optimistic, predicting a year-over-year sales increase of around 40%, bringing total sales to approximately $5 billion, with earnings per share expected to more than double compared to the previous year.
As the market awaits Carvana’s earnings announcement, investors are left weighing the potential for significant rewards against the inherent risks highlighted by Chanos. The results could serve as a pivotal moment for the company, determining whether it continues its impressive trajectory or faces challenges that could impact its future growth.