Carvana tumbles as weakness under the hood overshadows earnings beat

Carvana’s supercharged rebound just shifted into lower gear as its latest earnings report failed to impress investors’ sky-high expectations and justify the stock’s 444% rally over the past year, sending shares on a 12% tailspin. A top- and bottom-line beat from the used-car seller disguised some points of softness under the hood.

Of note: its wholesale business failed to move as many units as analysts expected. However, the used-car seller reported $3.55 billion in fourth-quarter revenue after market close on Wednesday, marking a 46% rise from a year prior and coming in above forecasts of $3.34 billion, according to analysts polled by Bloomberg.

The company’s adjusted earnings also exceeded expectations, coming in at $359 million for the quarter after a loss of $200 million a year prior. The latest figure brings the company’s full-year adjusted earnings to $1.38 billion, roughly in line with the company’s expectations for earnings “significantly above the high end” of a range between $1 billion to $1.2 billion.

In its forward outlook, Carvana said it expects another strong year, with significant growth in both units sold and adjusted earnings, but did not specify any exact numbers.

The stock’s downward move marks a slight dent in the tremendous rally that’s seen shares rise 6,859% from an all-time low in 2022. After nearing bankruptcy amid slowing sales and mounting debt, Carvana has seen its used-car sales rebound — up 33% over the course of last year — as new-car prices continue to rise since pandemic-era disruptions limited supply.

The turnaround hasn’t been without controversy, though. Last month, short seller Hindenburg Research accused the company of accounting manipulation and lax underwriting standards to boost results, all while shielding investors from the risk underlying the loans it originates and sells to lenders. Carvana said those accusations were nothing new, and stood firm on its accounting practices.

Kelly Cloonan is a journalist who has written for Business Insider and Fast Company.