Shares of car dealer Carvana plummeted 16%. Why was the market not convinced by the record revenue?
Carvana reported record revenue, but investors were disappointed with profits / Photo: Ken Wolter / Shutterstock
Quotes of the American online store of used cars Carvana collapsed on the premarket on February 19 by 16% after the publication of quarterly reports. Despite record high revenues, investors were disappointed with the size of profits and vague forecast, writes the Wall Street Journal.
As reported by Carvana
- The company's fourth-quarter revenue increased 58% year-over-year to $5.6 billion, while analysts had forecast $5.27 billion. Revenue for the full year 2025 increased 1.5 times to $20.3 billion, both of which were record highs for the company, MarketWatch notes.
- Auto sales were up 43%, about the same pace as the third quarter.
- Adjusted EBITDA, which is earnings before interest, taxes, depreciation and amortization excluding one-time items, was $511 million in the fourth quarter, while Wall Street was expecting $536 million. The company explained that the figure was impacted by higher non-production costs and depreciation and amortization, Bloomberg reports.
- Gross profit per car at retail amounted to $3076 - $255 less than in the same quarter of 2024. The company warned about the decline in the indicator at the end of last year, explaining it, among other things, by higher-than-expected costs for the restoration of cars, recalls Bloomberg. According to the forecast, they will remain elevated in the current quarter.
- Net income amounted to $951 million, but the figure was significantly increased due to a one-time tax adjustment - release of deferred tax asset provision. Excluding this factor and the loss from revaluation of warrants to purchase shares of insurer Root, adjusted net income amounted to $333 mln. 95% of this amount was provided by sales of car loans.
Prediction without specifics
- Carvana said its goals for next year are the same as last year: sell more cars, increase adjusted earnings, improve customer experience and increase operational efficiency. No specific financial guidance was provided in the outlook, MarketWatch notes.
The company is expanding aggressively, buying up cars, building up its repair network and acquiring dealerships, Bloomberg notes. Such tactics have supported rapid growth in used car sales - but margins are down one percentage point from a year ago, the agency notes.
In a conference call with analysts, CEO Ernest Garcia III emphasized that Carvana will continue to invest, Bloomberg reports. The company itself said it will focus on improving the efficiency of its expanded network this year and expects costs to level off.
"We've been growing rapidly. We hired new managers and restructured management levels to keep the expansion rate high. Sometimes this led to temporary setbacks," Garcia admitted.
What the analysts are saying
Of the 25 analysts covering the company's stock, 18 advise buying it, six are cautious and recommend holding these securities in a portfolio, and only - one advises selling.
The average target price is 33% higher than the last closing quote.
This article was AI-translated and verified by a human editor
