After slowdown last year, Carvana could again hit 400,000 used-vehicle sales in 2024

Carvana Co. is growing again. After scaling back sales volume in 2023 to focus on profitability initiatives, it is expected to return to sales of more than 400,000 used cars and trucks in 2024, several analysts said.

Carvana, of Tempe, Ariz., said July 31 it sold a little more than 101,000 used vehicles in the period ended June 30. That is up 33 percent year over year and 10 percent quarter over quarter. Revenue grew 15 percent to $3.41 billion.

The results — in which Carvana also reported higher profits per vehicle sold — prompted a handful of analysts to raise their share price targets for the company.

Despite the increased sales, Carvana technically remains in a transition period back to growth, CEO Ernie Garcia said during the company's earnings call with investors and analysts July 31.

"Now we're in a position where we're starting to turn the engines back on and we're moving in that direction," Garcia said.

Carvana said it expects to see another quarter-over-quarter increase in its used-vehicle sales in the third quarter. It is likely to reach or surpass 400,000 used vehicles sold by year end, analysts Marvin Fong of BTIG, Sharon Zackfia of William Blair and Chris Pierce of Needham and Co. wrote in research notes published after the second-quarter earnings release.

Carvana sold 312,847 used vehicles in 2023, 412,296 in 2022 and 425,237 in 2021.

Carvana reported long-term debt of $5.4 billion in the period ended June 30. Analysts sometimes cite Carvana's debt load as a risk factor of its business. At the same time, debt markets appear to be more receptive to Carvana than they were two years ago, Fong told Automotive News.

That puts the retailer in a position to eventually refinance its debt at lower interest rates. Carvana may not refinance soon because of the high interest rate environment, Fong said. What it could do, he said, is pay down the debt opportunistically — without taking out new debt — and in two to three years issue debt at "substantially" lower interest rates.

J.P. Morgan analysts wrote in an Aug. 1 research note they see potential for Carvana to further restructure its balance sheet, including refinancing the expensive notes that come due in 2030 and 2031. Still, Carvana indicated it does not intend to issue new debt or convertible bonds in the near future, according to the research note.

"We'll reduce [debt] over time," Garcia said during an appearance Aug. 1 on Bloomberg TV. "This quarter, we had $355 million [in adjusted earnings before interest, taxes, depreciation and amortization]. That starts to make that debt look a lot different than it may have looked a year or two ago, and I think if we keep having the gains that we expect to have, we'll keep accumulating cash and we'll keep looking much better from a leverage perspective, as well."

Company leaders disclosed Carvana's next plans to integrate its own vehicle reconditioning processes at its ADESA Corp. auto auction location in Belton, Mo., a suburb of Kansas City.

It will be Carvana's first ADESA "megasite" — offering both in-lane and online vehicle auctions while also functioning as a hub for a portion of Carvana's vehicle reconditioning work, Carvana CFO Mark Jenkins said during the company's earnings call.

It is the third ADESA site to be converted. Carvana announced similar conversions of ADESA Portland in Wood Village, Ore., and ADESA Buffalo in Akron, N.Y., this year. Those locations provide digital-only auctions.