Carvana Co (NYSE:CVNA) reported record third-quarter revenue and profitability, but its shares fell more than 7% in premarket trading Thursday, as cautious guidance and margin compression overshadowed the strong results.
According to Morgan Stanley analysts, the sell-off was “likely due to the in-line operating results versus an elevated buy-side bar.”
The online used car retailer delivered revenue of $5.65 billion for the quarter ended September 30, easily topping analyst forecasts of $5.09 billion and marking a 55% year-over-year increase.
Carvana sold a record 155,941 retail units, up 44% from the same period a year ago, highlighting continued market share gains despite a still-pressured auto retail sector.
The company also reported net income of $263 million, with a net margin of 4.7%, reflecting its best profitability to date. However, its adjusted EBITDA margin narrowed slightly to 11.3%, compared to 11.7% a year earlier and below consensus expectations of around 11.8%, according to Morgan Stanley.
Adjusted EBITDA for the quarter totaled $638 million.
Chief Executive Officer Ernie Garcia said: “In Q3, Carvana once again drove industry-leading growth and profitability while crossing over $20 billion revenue run rate scale for the first time. We continue to focus on unlocking the structural advantages of our vertically integrated model that strengthen our business and separate our customer offering.”
Looking ahead, Carvana expects to sell more than 150,000 retail units in the fourth quarter and anticipates full-year 2025 adjusted EBITDA to reach or exceed the upper end of its prior range of $2.0 billion to $2.2 billion.
Morgan Stanley analysts led by Daniela Haigian noted, “We believe the stock reaction is reflective of positioning going into the print and bulls moderately disappointed in the implied deceleration embedded in the unit guide for 4Q.”
They added, “Sell-side was already at the high end of the Adj. EBITDA guide for FY25, raising questions around the direction of next twelve months (NTM) estimate revisions following this print.”
Bank of America analysts echoed those views, writing that the retail unit guidance “implies a 4% quarter-on-quarter drop in units sold at the low end of outcomes, which would imply a 13pt deceleration in year-on-year growth.”
They added: “Though this is largely in line with Street at 150.6k for 4Q units prior (Visible Alpha), we think investors were likely expecting more 4Q upside following the big 3Q beat.”
Operationally, Carvana said it continues to expand its infrastructure, having integrated three additional ADESA locations in the quarter. This brings its total retail inventory pools to 33, with capacity for more than 1.5 million retail units annually by year-end — far above its current sales pace.
The company also underscored its technology-driven edge, noting the success of same-day delivery pilots and AI-powered customer support tools that now allow over 30% of buyers to complete purchases entirely online until delivery.