What Happened?
Shares of online used car dealer Carvana (NYSE: CVNA) fell 3.7% in the morning session after the company's recent earnings report sparked fears about its future performance, despite strong results.
The stock pulled back due to guidance that pointed to a potential sequential decline in retail unit sales. Management's forecast for the fourth quarter was for at least 150,000 retail units, which was down from 155,941 in the third quarter. Broader concerns about rising auto loan delinquencies and narrowing profit margins also weighed on investor sentiment. Following the report, Citi lowered its price target on the company's shares to $445 from $490, reinforcing the negative market reaction to the outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Carvana? Access our full analysis report here.
What Is The Market Telling Us
Carvana’s shares are extremely volatile and have had 42 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 9.7% on the news that it reported underwhelming third-quarter earnings report. The company posted impressive revenue of $5.65 billion, a 54.5% year-on-year increase that sailed past analyst estimates of $5.08 billion. Adjusted EBITDA, a measure of profitability, also outperformed, coming in at $637 million against an expected $600.2 million. However, the strong results were overshadowed by a weaker-than-expected outlook. Carvana's guidance for the number of used car unit sales in the upcoming fourth quarter fell slightly short of expectations, disappointing investors who were hoping for a more robust forecast, especially amid recent macroeconomic concerns. The muted outlook signaled potential headwinds, causing the stock to trade down despite the solid quarterly performance.
Carvana is up 60.8% since the beginning of the year, but at $320.94 per share, it is still trading 18.8% below its 52-week high of $395.41 from September 2025. Investors who bought $1,000 worth of Carvana’s shares 5 years ago would now be looking at an investment worth $1,595.
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