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Investing.com -- Carvana Co (NYSE:CVNA) reported record third-quarter revenue that handily beat analyst expectations, but shares in the online used car retailer slumped over 7% in premarket trading.
The drop, according to Morgan Stanley analysts, was “likely due to the in-line operating results versus an elevated buy-side bar.”
Carvana posted revenue of $5.65 billion for the quarter ended September 30, significantly exceeding the consensus estimate of $5.09 billion and representing a 55% increase YoY.
The company sold a record 155,941 retail units, up 44% from the same period last year, demonstrating continued market share gains in a challenging auto retail environment.
Carvana achieved record profitability with net income of $263 million and a net income margin of 4.7%.
Adjusted EBITDA margin declined to 11.3% from 11.7% in the year-ago quarter. Consensus estimates were around 11.8%, according to Morgan Stanley.
The company’s adjusted EBITDA came in at $638 million.
"In Q3, Carvana once again drove industry-leading growth and profitability while crossing over $20 billion revenue run rate scale for the first time," said Ernie Garcia, Carvana founder and CEO. "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 fourth-quarter retail units sold to exceed 150,000. The company also projected full-year 2025 Adjusted EBITDA to be at or above the high end of its previously communicated range of $2.0 to $2.2 billion.
"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," analysts led by Daniela Haigian wrote.
"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," they added.
Bank of America analysts shared similar remarks regarding the retail units outlook, saying it "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."
"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."
The company highlighted its expansion efforts, noting it had integrated three more ADESA locations during the quarter, bringing its total number of retail inventory pools to 33. By year-end, Carvana expects to have built-out capacity for over 1.5 million retail units annually, significantly above its current sales run rate.
Carvana also emphasized its technological advantages, including same-day delivery capabilities in test markets and AI-powered customer service tools that have allowed more than 30% of car buyers to complete purchases without human assistance until delivery.
(Luke Juricic contributed to this report.)