Why Investors Are Sour on Carvana Today

Online used car retailer Carvana (NYSE:CVNA | CVNA Price Prediction) has tumbled 16.5% so far on Thursday despite reporting Q4 earnings that exceeded Wall Street’s expectations. This decline comes after a stellar rally that saw CVNA deliver 5,600% gains from its trough in December 2022 to its peak in 2025 last week.

24/7 Wall St. Key Points:

• CVNA stock delivered explosive gains in the past two years, but the stock has nosedived after its Q4 2024 report.
• Carvana’s Q4 2024 earnings report beat analyst expectations in almost all metrics.
• However, the stock still fell. Why? Let’s take a look. In the meantime, grab our free “The Next NVIDIA” report. It includes a software stock with 10X potential.

What Happened

Carvana posted Q4 EPS of $0.56, which handily beat analyst expectations of $0.31. Revenue also increased 46% year-over-year to $3.55 billion and this too was much higher than the $3.34 billion expected by analysts.

On top of that, retail unit sales surged 50% to 114,379. Adjusted EBITDA came in at $359 million vs. $329.4 million expected by analysts. In short, Q4 results trounced analyst expectations by stellar margins.

Wall Street is sour on the stock as retail gross profit per vehicle declined to $3,226. This is a $270 decline from Q3 and gross profit per wholesale vehicle also missed analyst estimates of $714 and came in at $674. It was $930 in the previous quarter.

Carvana also didn’t give any specific guidance for 2025. Investors priced in perfect execution and expected both blowout results and good guidance. Carvana’s outlook just included “significant growth,” which isn’t really a good yardstick that investors can follow to know where this train is heading. As such, many are just turning to profit-taking after a frothy rally.

What This Means for CVNA Stock

There’s a good chance CVNA could recover in the long run, especially if management swoops in and clarifies the guidance for 2025. Still, you’re paying over 2 times forward earnings and 77 times forward sales. That’s a lot for a company that was on the verge of bankruptcy less than two years ago and still has a debt load of $6 billion. This is much lower than $8.4 billion in 2022, but still a big amount considering the $1.7 billion cash position.

If guidance remains vague, it’s going to leave a lot of shareholders blind about Carvana’s future. With how high the shares still are right now, these shareholders could simply opt to sell the stock and move on to something that offers more value.

Regardless, the consensus price target here is $252.8, which implies roughly 6% upside potential from Carvana’s current price. The highest price target is at $350 from JPMorgan, who thinks the Q4 report was “largely in-line.” Needham also raised its stock price target to $340, so the post-earnings price target reshuffling seems bullish.

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