After the online used car retailer missed Wall Street’s top- and bottom-line projections for the third quarter and announced decreases in revenue, earnings, and sales compared with a year earlier, shares of Carvana plummeted in extended trading on Thursday.
After-hours trading saw a more than 7% decline in the stock, quickly wiping out a 6.5% gain from earlier in the trading day. The company’s shares have almost been slashed in half this year as used vehicle sales and high prices have declined from record highs. The share price on Thursday at the closure was $14.35.
Here is how Carvana fared in comparison to analysts’ predictions as gathered by Refinitiv:
$2.67 instead of the anticipated $1.94 loss per share
Comparing $3.71 billion in revenue to $3.39 billion
The Carvana’s business saw a reduction in almost all areas from the prior year, including a 31% decline in gross profit to $359 million. Its retail unit sales fell by 8% to 102,570 automobiles in the third quarter of 2021 while its gross profit per unit, a key indicator for investors, fell by more than $1,100 to $3,500.
When it came to buying a car or truck last year, shoppers who couldn’t locate or couldn’t afford to buy a new one opted for a used one. New vehicle inventories have been considerably depleted during the coronavirus pandemic, mostly as a result of supply chain issues, particularly a persistent global semiconductor chip shortage.
Ernie Garcia, the CEO and cofounder of Carvana, stated in a release that “this economic situation remains uncertain, but we are focused completely on the aim of driving the business to profitability.” We continue to be on the way to become the biggest and most successful auto retailer, despite the fact that progress is rarely linear.
Garcia predicted “a challenging year” for the business for the coming year, noting, among other things, a normalisation of the used car market from its inflated levels and rising interest rates.
When recently presenting their third-quarter results, major franchised new and used car dealers like Lithia Motors and AutoNation issued a warning about a slowdown in the used car market.