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Carvana reports slower sales growth, lower profit per vehicle
Still, online auto retailer says it made record $769M in adjusted EBITDA in the second quarter
Key Takeaways:
- Carvana reported record second-quarter adjusted EBITDA of $769 million July 29, but shares fell 15% after hours as growth slowed and profits missed expectations.
- Vehicle sales rose 38% to more than 197,000, while gross profit per unit declined and full-year EBITDA guidance midpoint trailed 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. tumbled after it said full-year earnings may fall short of Wall Street’s expectations as the used-car retailer’s rapid growth slowed and per-car profit slipped in the most recent quarter.
The online auto retailer said July 29 that it made 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, an indication that reaping earnings from its growing business is becoming harder work at a time when industrywide used-car sales slowed.
The company’s shares dropped 15% in after-hours trading in New York, extending the stock’s 21% decline this year.
Carvana ranks No. 61 on the Transport Topics Top 100 list of the largest private carriers in North America.
Carvana has been working to maintain its pace of expansion without sacrificing margins. Investors have been watching to see if the company can continue to push up sales without lowering prices or spending heavily on marketing.
Vehicle sales rose 38% to a little more than 197,000 vehicles in the period. That’s close to the roughly 40% gains the company has seen for several quarters, yet the slowest pace of growth since the third quarter of 2024.
“This marks 10 straight quarters of being the fastest-growing and most profitable automotive retailer — achieving both by large margins,” CEO Ernest Garcia III said in a letter to shareholders. “We have said that we believe the biggest driver of our results for the foreseeable future will be our execution. We still believe it.”
The question for investors is whether Carvana’s earnings will continue to justify a valuation that far exceeds other auto retailers.
In his letter, Garcia said the company expects adjusted EBITDA of $2.7 billion to $3 billion for the full year. Although that’s an increase from $2.2 billion last year, the outlook’s midpoint fell short of the $2.99 billion average of analyst estimates.
The Tempe, Ariz., company made $349 million in profit selling loans, accounting for about 68% of net income. Although the figure declined slightly from the first quarter, it suggests that the company’s non-finance profits are getting stronger.
