Al Root

Carvana reported better-than-expected sales and earnings for the fourth quarter and sees even more growth in 2025. The stock, which has surged by triple-digits over the past year, dropped shortly after numbers were released.

Wednesday afternoon, the car dealer announced sales of $3.5 billion in the quarter, above Wall Street's expectations of $3.3 billion, according to Bloomberg; adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $359 million, above the $330 million estimate; and earnings per share of 56 cents, well surpassing the 32 cents in earnings per share forecast.

A year ago, Carvana generated sales of $2.4 billion, Ebitda of $42 million, and a loss of $1 a share.

Carvana sold about 416,000 cars in 2024, up from 313,000 in 2023. About 39 million used cars were sold in the U.S. in 2024.

Carvana reported an adjusted margin of about 10%. AutoNation and CarMax reported margins of closer to 6% and 4% over the past 12 months.

Looking ahead, Carvana says it expects "significant growth" in Ebitda. Carvana doesn't always provide a fixed number or range with its guidance. Wall Street analysts currently project $1.8 billion for 2025, up about 30% from the $1.4 billion reported for 2024.

Shares were down about 8.3% in after-hours, trading at $258.50 apiece. The drop could be blamed on the starting point. Through Wednesday, Carvana stock gained roughly 450% over the past 12 months. That makes calling the reaction to any earnings report -- even a so-called beat -- difficult.

Net income was also boosted by a gain on some warrants held by the company. Investors often discount one-time gains, though the benefit doesn't appear to have impacted the adjusted Ebitda figure.

Carvana didn't immediately respond to a request for comment.

Investors should brace for volatility on Thursday. Options markets imply shares will move about 13% up or down following earnings. Shares gained an average of 24% following the past four quarterly reports.

Still, the results look solid.

"In 2024, Carvana became the most profitable public automotive retailer in U.S. history as measured by adjusted Ebitda margin while also resuming industry-leading growth," said CEO Ernie Garcia. "With just about 1% market share today and many opportunities to improve and expand our offering from here, we know this is just the beginning of our journey to change the way people buy and sell cars."

Carvana has undergone a remarkable recovery. Shares closed Wednesday around $282, up roughly 7,400% from lows reached in December 2022. At its low point, Carvana's market value was less than $1 billion. Now, it's closer to $60 billion.

High debt levels partly caused shares to drop. Carvana likely ended the quarter with net debt a little north of $6 billion, down from about $8.4 billion at the end of 2022.

At the end of 2022, Carvana's net debt to Ebitda ratio was negative, meaning the company wasn't producing positive Ebitda. Now, debt is closer to three times Ebitda. That is still a little high, but an improvement. The average debt to estimated Ebitda ratio for stocks in S&P 500 is just under two times.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 19, 2025 19:23 ET (00:23 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.