An employee unloads a vehicle from a flatbed truck at a Carvana vending machine location in Uniondale, NY (Angus Mordant/Bloomberg).
key takeaways:
- Carvana reported record second-quarter adjusted EBITDA of $769 million on July 29, but shares fell 15% after hours as growth slowed and profits fell short of expectations.
- Vehicle sales rose 38% to more than 197,000, while gross profit per unit declined and full-year EBITDA guidance missed midpoint analyst estimates.
- CEO Ernest Garcia III said execution remains the key focus as Carvana targets $2.7 billion to $3 billion in adjusted EBITDA this year.
Carvana Co. fell after it said full-year earnings may fall short of Wall Street expectations as the used car retailer’s rapid growth slowed and profit per car slipped in the most recent quarter.
The online auto retailer said July 29 it earned a record $769 million in adjusted earnings before interest, taxes, depreciation and amortization in the second quarter. That’s barely ahead of the $766 million average of analyst estimates compiled by Bloomberg. Gross profit per unit also declined, a sign that generating earnings from its growing business has become a tougher task at a time when industrywide used car sales have slowed.
The company’s shares fell 15% in after-hours trading in New York, bringing the stock’s decline this year to 21%.
Carvana is ranked 61st on Transportation Topics’ Top 100 list of the largest private carriers in North America.
Carvana is working to maintain the pace of its expansion without sacrificing margins. Investors are paying attention to see if the company can continue to grow sales without lowering prices or spending heavily on marketing.
Vehicle sales increased by 38% during the period to just over 197,000 vehicles. That’s close to the nearly 40% gain the company has seen over several quarters, yet the slowest pace of growth since the third quarter of 2024.
“This marks 10 consecutive quarters of becoming the fastest-growing and most profitable automotive retailer – both achieved by wide margins,” CEO Ernest Garcia III said in a letter to shareholders. “We have said that we believe the biggest driver of our results in the near term will be our execution. We still believe that.”
The question for investors is whether Carvana’s earnings will continue to justify a valuation that far exceeds that of other auto retailers.
Garcia said in his letter that the company expects adjusted EBITDA of $2.7 billion to $3 billion for the full year. Although that’s up from last year’s $2.2 billion, the outlook’s midpoint fell short of the $2.99 billion average of analyst estimates.
The Tempe, Ariz., company made $349 million in profit by selling loans, about 68% of net income. Although there is a slight decline in this figure compared to the first quarter, it shows that the company’s non-financial profits are strengthening.
