Carvana Leading Auto Retail – Outpacing LAD & AN-Financial Performance & Momentum:
Carvana reported a record-breaking adjusted EBITDA of $488M in Q1 2025, up $253M YoY, with an EBITDA margin of 11.5% (+3.8pp YoY). The company's strong operational efficiency positions it as a leader in the auto retail industry, nearly doubling the margins of competitors like Lithia Motors (LAD) and AutoNation (AN).
- Competitive Positioning & Growth Outlook:
Carvana’s EBITDA quality is superior due to lower non-cash expenses, enhancing long-term sustainability. The company expects sequential EBITDA growth in Q2 and targets 13.5% EBITDA margins within 5-10 years.
-Peer Comparison:
- Lithia Motors (LAD): EBITDA margin at 4.4% (up from 4% YoY), facing tariff-related headwinds that could impact pricing and demand.
- AutoNation (AN): SG&A as a percentage of gross profit rose to 67.5% in Q1, expected to stay between 66-67% in FY 2025, pressuring margins further.
-Options Flow & Institutional Activity - Key Levels: $350/$370
Recent institutional flow activity indicates strong positioning around $350/$370 strikes, potentially signaling a vertical spread in play rather than outright selling:
1️⃣ Momentum Confirmation:
- CVNA has strong upside momentum following its Q1 results, reinforcing a bullish outlook for near-term price action.
- Institutional traders may be accumulating bullish vertical spreads rather than unwinding positions.
Vertical Spread Setup ($350/$370 Strikes)
- Long Call ($350 Strike) → Signals expectations for further upside.
- Short Call ($370 Strike) → Caps max profit while reducing cost.
- Breakeven Price: $359 → CVNA must close above $359 for profitability.
Profit & Risk Zones
- Above $370: Maximum profit achieved.
- Between $359-$370: Partial profit zone (spread remains in play).
- Below $359: Spread loses value, making recovery dependent on extended upside momentum.
