Carvana Co.'s aggressive growth shows no sign of slowing: The online used-car retailer continues to charge into new markets on the strength of investor backing and improving vehicle sales and gross profit.
Net profit, however, remains elusive for the company: last week it reported a net loss of $64.4 million for the third quarter, bigger than its net loss of $39.8 million in the year-ago quarter.
But though the retailer has yet to turn a profit, Carvana is having no trouble being funded with equity and debt because investors believe the retailer has legs, said Gary Prestopino, a managing director and senior analyst at Barrington Research Associates Inc.
"They're kind of like the Tesla of the dealership world," Prestopino said. "As long as they keep growing, they're going to continue to get people to give them money."
Carvana's vehicle unit sales more than doubled in the third quarter to 25,324. Gross profit nearly tripled in the quarter to $57.3 million. The company said it sold more vehicles in the third quarter than in all of 2015 and 2016 combined. It expects triple-digit percentage growth in unit volume and revenue to continue the rest of the year.
Carvana added 13 markets in the third quarter. With four opening in the fourth quarter, Carvana expects to end the year with 84 markets.
Although it has reported heavy losses since going public in April 2017, Carvana executives indicated last week that there is a path to finishing in the black.
Third-quarter gross profit per unit was $2,263, up from $1,742 in the year-ago quarter. Carvana has set a medium-term goal of getting that figure to $3,000. In a conference call last week with investors and analysts, CEO Ernie Garcia said the progress in gross profit per unit "lightened the path to profitability more than ever before."
Carvana's stock has also performed well recently. In its debut on the New York Stock Exchange on April 28, 2017, the company's share price closed at $11.10. On Thursday, the day after reporting third-quarter results, Carvana's stock closed at $51.47.
"We believe Carvana has significant long-term growth potential in the used-vehicle market," Prestopino said in Barrington's note to investors after last week's earnings announcement.