Carvana Beats Revenue and Profit Estimates, Shares Dip

Financial Results

Online car dealer Carvana (CVNA) reported strong financial results for the fourth quarter, surpassing analysts' expectations for revenue and earnings per share (EPS).

* Revenue: $3.55 billion, up 32% year-over-year and slightly above the expected $3.34 billion.
* EPS: $0.56, significantly higher than the estimate of $0.31.
* Adjusted EBITDA: $359 million, exceeding the forecast of $329.4 million.

Operational Performance

* Retail unit sales reached 114,379 in Q4, outpacing the estimated 108,339.
* For the full year, Carvana recorded a record adjusted EBITDA of $1.378 billion, with a margin of 10.1%.
* Total retail unit sales for 2023 hit 416,000, up 33% year-over-year and generating record annual revenue of $13.67 billion.

Outlook

Carvana anticipates continued growth in retail unit sales and adjusted EBITDA for 2024. The company projects sequential increases in both metrics in Q1, assuming stable market conditions.

Stock Performance

Despite the strong financial performance, Carvana shares initially dropped by 10% in after-hours trading. This decline comes after the stock hit a fresh 52-week high earlier in the day. Shares had previously surged by nearly 300% in 2023 and 43% in 2024.

Business Model

Carvana, which operates exclusively online, experienced significant growth during the pandemic as consumers sought safe and convenient car-buying options. However, rising used car prices and inventory management issues led to challenges in 2022. Carvana has since cut operating costs, refined its used car acquisition strategy, and achieved profitability in 2023.

Controversies

Carvana has faced some controversies recently. In January 2023, short seller Hindenburg Research alleged accounting irregularities and criticized the company's loan underwriting practices. Hindenburg has since wound down its operations.