Carvana's Q4 Beat: A Tale of Two Stories

Carvana Co. (NYSE: CVNA) reported its fourth-quarter and full-year 2024 financial results on February 19, 2025, and the market reaction was... mixed, to say the least. The company topped Wall Street's estimates for both revenue and earnings per share, yet its stock price dropped following the announcement. Let's dive into the numbers and explore the reasons behind this seemingly paradoxical situation.



Carvana reported record top and bottom-line results for the fourth quarter and full year 2024. Here are some key highlights:

* Q4 revenue: $3.55 billion, up 46% year-over-year (YoY)
* Q4 net income: $159 million, with a net income margin of 4.5%
* Q4 adjusted EBITDA: $359 million, with an adjusted EBITDA margin of 10.1%
* Full-year revenue: $13.67 billion, up 27% YoY
* Full-year net income: $404 million, with a net income margin of 3.0%
* Full-year adjusted EBITDA: $1.38 billion, with an adjusted EBITDA margin of 10.1%

These impressive results demonstrate Carvana's ability to scale profitably and maintain its industry-leading growth. So, why did the stock price drop?



The Tale of Two Stories

1. The Bullish Story: Carvana's strong financial performance, driven by industry-leading retail unit growth and improved profitability, paints a rosy picture for the company. The company's growing presence in the electric vehicle (EV) market, with 5.7% of its used vehicles sold being electric, further enhances its appeal. Analysts have been bullish on Carvana, with several firms upgrading their ratings and price targets in recent months. The company's management team is also optimistic about its future, citing its unique business model and significant capacity to support growth.
2. The Bearish Story: Despite the strong financial results, Carvana's stock price dropped following the announcement. This could be attributed to a few factors:
* Market Sentiment: The broader market may have been influenced by negative sentiment, leading to a general sell-off that affected Carvana's stock price.
* Short Sellers: Carvana has been the subject of multiple short reports in recent years. Short sellers may have taken advantage of the strong financial results to cover their positions, putting downward pressure on the stock price.
* Analyst Estimates: While Carvana beat analyst estimates for revenue and earnings per share, the market may have been expecting even more impressive results, leading to a "sell the news" reaction.



Looking Ahead

Carvana's 2024 results position the company well for a strong 2025. The company expects significant growth in both retail units sold and adjusted EBITDA in the full year 2025, including a sequential increase in both during the first quarter. As investors, we should focus on the company's strong fundamentals and growth prospects, rather than getting caught up in short-term market fluctuations.

In conclusion, Carvana's Q4 results tell a tale of two stories: one of impressive financial performance and growth prospects, and another of a stock price drop that may be more reflective of broader market sentiment and short seller activity than the company's fundamentals. As long-term investors, we should remain focused on the company's strong fundamentals and growth prospects, rather than getting swayed by short-term market noise.