Carvana stock slumps as sales decelerate, losses likely to linger

Joe Raedle

Carvana (NYSE:CVNA) shares slid sharply in Thursday’s extended session as large losses persisted and unit sales decelerated in the third quarter. Further, little optimism on a coming inflection in industry dynamics was offered by management.co

The Arizona-based used car seller posted a loss of $2.67 per share alongside a 2.6% drop in revenue from the prior year to $3.39B. The loss per share was $0.50 larger than anticipated while the sales figure was $300M short of the analyst consensus. Total retail units sold in the quarter fell to 102,570, a decrease of 8% from the prior year.

“We made significant progress in Q3 driving operational efficiencies despite the considerable headwinds facing our industry. Our committed team achieved notable cost reductions across our business while continuing to deliver exceptional customer experiences,” CEO Ernie Garcia said. “This economic environment remains uncertain, but we are focused squarely on the goal of driving the business to profitability. While progress is rarely linear, we remain on the path to becoming the largest and most profitable auto retailer.”

Garcia highlighted SG&A expense in his letter to shareholders, highlighting a stretch goal of $4,000 in SG&A expenses per vehicle, but added that due to the current volume environment the company does not expect to reach this stretch goal on a per unit basis in Q4. Retail units sold and total GPU are expected to fall in the fourth quarter amid “reduced used vehicle industry demand, increasing benchmark interest rates, higher used vehicle depreciation rates” as well as profitability initiatives currently underway.

“Looking toward 2023, we are not providing a quantitative outlook at this time,” Garcia concluded. “In light of current industry and macroeconomic conditions, we believe forecasting the environment over the coming months and quarters is difficult, and we plan instead to provide more real time color on how certain key dynamics are likely to impact our results.”

Shares of Carvana (CVNA) fell 5.16% shortly after the announcement of the Q3 results.

Read more on JP Morgan’s recent upgrade of the online auto seller.