Why Carvana (CVNA) Is Plunging Today

Carvana (CVNA) is sinking 14% after the company’s retail gross profit per vehicle fell significantly and analysts, according to Yahoo Finance, were disappointed by the lack of detail that the company provided regarding its outlook.

Also importantly, the company sold more of its loans than expected. However, CVNA’s overall fourth-quarter financial results did surpass analysts’ average estimates.

The Disappointing Aspects of Carvana’s Report

The firm’s retail gross profit per vehicle dropped by $270 in Q4 versus Q3 to $3,226. Moreover, its gross profit per wholesale vehicle came in at $674, well below analysts’ average estimate of $714.

Meanwhile, the company generated $214 million by selling its loans in Q4, enabling its Q4 EBITDA to come in above analysts’ average outlook. The value of the loans shed by the company in Q4 was almost three times as high as in Q4 of 2023. The company’s high reliance on loan sales in Q4 reportedly disappointed some investors.

Also disappointing investors, according to Yahoo Finance was the “lack of specificity” in the company’s guidance. CVNA noted that it anticipates “significant growth” in the number of retail units it sells this year and in its adjusted EBITDA in 2025. The company added that it expects its retail units sold and adjusted EBITDA to climb in the current quarter versus Q4.

Better-Than-Expected Q4 Results

Last quarter, the company generated revenue of $3.55 billion, versus analysts’ average estimate of $3.34 billion. Its EPS came in at 56 cents, well above the mean outlook of 31 cents.

While we acknowledge the potential of CVNA, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.