Carvana Stock Plunges Thursday, Deepening Its Recent Rout. Here’s Why

Key Takeaways

• Carvana shares tumbled Thursday after the online car marketplace reported some fourth-quarter profit metrics that came in below expectations.
• The company said some costs came in higher than anticipated, and warned it could face elevated vehicle reconditioning costs in the first quarter.

Carvana stock backed into reverse on Thursday.

Shares of Carvana (CVNA) dropped 8% close to just under $333, a day after the online used car marketplace reported weakness in some key profitability metrics that outweighed solid sales numbers.

The company’s gross profit per unit declined year-over-year and came in below analysts’ expectations at $6,427 for the fourth quarter. The company said in its letter to shareholders that some costs were higher than anticipated.

Carvana also warned it could face elevated vehicle reconditioning costs in the first quarter, though it expects per-vehicle profits to improve.

Why This Matters to Investors

Thursday’s drop could underscore worries about Carvana’s profits, and extends the stock’s recent slump after a short-seller report raised concerns about the company’s finances.

For the full year, Carvana said it forecasts “significant growth” in vehicle sales volume and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), but the company declined to provide specific figures in its forecasts for the current quarter or full year.

Analysts from Wedbush and JPMorgan cut their price targets for Carvana to $425 and $490, respectively, following the results. Still, both firms said they remain bullish on Carvana’s potential for gains, pointing to its strong sales growth.

Carvana reported a 58% year-over-year jump in revenue to $5.6 billion in the fourth quarter, topping the analyst consensus compiled by Visible Alpha.

Related Education

Buying an Older Used Car? You Might Be Surprised Which Lenders Will Finance It

Earnings: Company Earnings Defined, With Example of Measurements

While ratings are still in flux, Wall Street analysts are widely bullish on the stock. Twelve of the 13 analysts tracked by Visible Alpha have issued “buy” or equivalent recommendations, compared to one neutral rating. Their average price target of $450 would suggest 35% upside from the stock’s recent level.

With Thursday’s drop, Carvana shares have lost about a fifth of their value since the start of the year.

_This article has been updated since it was first published to reflect more recent stock prices. _

Do you have a news tip for Investopedia reporters? Please email us at

[email protected]