Monday, July 15, 2024

Carvana tumbles after posting declines in nearly every aspect of the car reseller’s business

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Ernie Garcia, CEO, Carvana

Scott Mlyn | CNBC

Shares of Carvana fell in extended trading Thursday after the online used car retailer missed Wall Street’s top- and bottom-line expectations for the third quarter and reported declines in revenue, profit and sales compared with a year earlier.

The stock fell by more than 7% during after-hours trading, quickly erasing a 6.5% gain from earlier in the trading day. Shares of the company have been nearly cut in half this year, as used vehicle sales and elevated prices cooled off from record highs. The stock closed Thursday at $14.35 a share.

Here’s how Carvana performed, compared with analysts estimates as compiled by Refinitiv:

  • Loss per share: $2.67 vs. $1.94 expected
  • Revenue: $3.39 billion vs. $3.71 billion

Nearly all aspects of the Carvana’s operations declined from a year earlier, including a 31% decrease in gross profit to $359 million. Its retail units sold declined 8% compared with the third quarter of 2021 to 102,570 vehicles, while gross profit per unit — a highly watched metric by investors — declined by more than $1,100 to $3,500.

The used vehicle market a year ago was significantly elevated as consumers who couldn’t find or afford to purchase a new vehicle opted for a pre-owned car or truck. Inventories of new vehicles have been significantly depleted during the coronavirus pandemic largely due to supply chain problems, including an ongoing global shortage of semiconductor chips.

“This economic environment remains uncertain, but we are focused squarely on the goal of driving the business to profitability,” Carvana CEO and cofounder Ernie Garcia said in a release. “While progress is rarely linear, we remain on the path to becoming the largest and most profitable auto retailer.”

Garcia on a call Thursday described the next year as “a difficult one” for the company, citing a normalization of the used vehicle industry from its inflated levels and increasing interest rates, among other factors.

Large franchised new and used vehicle dealers such as Lithia Motors and AutoNation warned of softening in the used vehicle market when recently reporting their third-quarter results.

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