Carvana shares dip while originations soar 53.3%

Shares of Carvana fell by nearly 17% this morning following the retailer and lender’s latest earnings, which saw an increase in originations but a quarter-over-quarter decline in retail gross profit per unit. The Tempe, Ariz.-based company’s auto originations rose 53.3% year over year and 4.6% QoQ to $2.3 billion in Q4, according to an Auto Finance News analysis of the retailer’s Feb. 19 letter to shareholders. Full-year originations came in at $8.3 billion, up 37.9% YoY. “Our results in 2024 position us well for a strong 2025,” Chief Financial Officer Mark Jenkins said on the Feb. 19 earnings call. “The strong demand we experienced in the first three quarters of the year continued into the fourth quarter.” Finance receivables held for sale in the quarter hit $612 million, down 24.2% YoY but up 14.8% compared with Q3, according to the letter. Retail sales up, GPUs mixed Origination growth was not the only bright spot for Carvana in Q4. The retailer also saw double-digit growth in Q4 and full-year retail sales. Retail sales jumped 50.3% YoY to 114,379 units in Q4 while full-year sales climbed 33.1% YoY to 416,348 units, according to the letter. Q4 retail sales saw “a significant acceleration from Q3” and “the second-highest quarterly retail unit sales in [Carvana’s] history, despite Q4 being a seasonally lower demand period,” Jenkins said. Quarterly retail unit sales (thousands) [caption id="attachment_58349186" align="aligncenter" width="1252"] (Courtesy/Carvana)[/caption] Working against investor sentiment, retail gross profit per unit (GPU) and other GPU, which includes finance and insurance profits, were mixed in Q4. Other GPU landed at $2,771 in Q4, up 42.5% YoY but down 7.6% QoQ, while full-year other GPU rose 14.9% YoY to $2,765, according to the letter. Fourth-quarter retail GPU came in at $3,226, up 14.7% YoY but down 7.8% QoQ, according to the letter. Full-year retail GPU was $3,312, up 38.9% YoY. The decline was largely due to seasonal factors, WedBush analysts Seth Basham and Matthew McCartney said in a research note shared with AFN . “While we are modestly disappointed in the retail GPU miss, we believe it was from more normal seasonality than we appreciated and not from increased price investments or issues with retail marketplace unit sales,” the analysts said. Carvana attributed the QoQ decline to “higher retail depreciation rates and lower spreads between wholesale and retail market prices, partially offset by reductions in reconditioning and inbound transport costs.” Investor sentiment has fluctuated in recent months, with today’s dip in stocks coming just weeks after a January controversy, when short-seller Hindenburg Research called Carvana’s success following its near bankruptcy in 2022 a “mirage.” Carvana told AFN at the time that the claims were “intentionally misleading and inaccurate.” JP Morgan in a report published Jan. 2 noted that Carvana could provide added transparency “around gain on sale economics at partners and related [free cash flow] moving parts,” but maintained its “overweight” rating. Maintaining diverse funding Meanwhile, Carvana issued seven transactions in the asset-backed securitization (ABS) market in 2024 totaling about $4 billion, according to Finsight , which monitors securities. Four of the transactions were backed by prime auto loans, while three were backed by nonprime loans. Register here for the free Auto Finance News webinar “Funding Strategies: From Warehousing to Private to ABS” on March 11 . Carvana's total liquidity resources amounted to $5.7 billion in 2024, up 81.9% YoY, according to the letter. “Our strategy since very early on at Carvana was to use multiple channels for loan sales, a combination of whole loan sales and securitization market transactions and to maintain those diversified funding sources ,” Jenkins said. “That's our expectation going forward.” Added megasites pending Carvana executives also reiterated expansion plans for the year, which have been in the works since the team acquired Carmel, Ind.-based ADESA ’s U.S. physical auction business in 2022. The $2.2 billion acquisition, which came with 56 physical ADESA sites, was aimed to eventually integrate retail and wholesale capabilities under one roof, according to a release published by Carvana on May 10, 2022. Carvana integrated six of the 56 ADESA “megasites” in 2024, Chief Executive Ernie Garcia said on the call. This year, the retailer plans to open about 10 more, he said. “Our inspection centers that were in operation before we began integrating our ADESA megasites had capacity for over 1 million retail units, about three times our current volume,” Garcia said. “Fully integrating all ADESA megasites will give us capacity for approximately 3 million retail units, or eight times our current volume.” 2025 expectations Carvana remains optimistic about the year to come, Jenkins said. “Assuming the environment remains stable, looking forward, we expect significant growth in both retail units sold and adjusted EBITDA in full year 2025, including a sequential increase in both retail units sold and adjusted EBITDA in Q1 2025,” he said. The WedBush research note shared similar optimism, adding “While CVNA shares will sell off this morning, the growth story is not over. Indeed, while we still have some reservations about operational limitations to growth, we raise our 2025 retail growth estimate to 27%, from 20%.” Shares of Carvana [NYSE: CVNA] sank in the early hours of Feb. 20, down almost 17% at 11:30 a.m. ET. Shares had slightly recovered by market close and were trading down 12% from market open at $247.72. Auto Finance Summit East 2025 is set for May 12-14 at the JW Marriott Nashville featuring fireside chats with Santander Consumer USA and Chase Auto. Visit autofinance.live for more information. Early-bird registration is available here .

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