What Happened?
Shares of online used car dealer Carvana (NYSE: CVNA) fell 9.7% in the morning session after it reported underwhelming third-quarter earnings report.
The company posted impressive revenue of $5.65 billion, a 54.5% year-on-year increase that sailed past analyst estimates of $5.08 billion. Adjusted EBITDA, a measure of profitability, also outperformed, coming in at $637 million against an expected $600.2 million. However, the strong results were overshadowed by a weaker-than-expected outlook. Carvana's guidance for the number of used car unit sales in the upcoming fourth quarter fell slightly short of expectations, disappointing investors who were hoping for a more robust forecast, especially amid recent macroeconomic concerns. The muted outlook signaled potential headwinds, causing the stock to trade down despite the solid quarterly performance.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Carvana? Access our full analysis report here.
What Is The Market Telling Us
Carvana’s shares are extremely volatile and have had 42 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 3.3% on the news that investor optimism grew ahead of its third-quarter earnings report, scheduled for release on October 29. Wall Street expected the online used car platform to report a significant jump in earnings, with forecasts pointing to a year-over-year increase of over 100%. Revenue was also projected to climb by about 40% to over $5 billion. The positive outlook was fueled by the company's turnaround efforts, which had already pushed the stock up 75% year-to-date. In a sign of confidence before the results, a JPMorgan analyst increased the price target on the stock to $490 from $425.
Carvana is up 54.5% since the beginning of the year, but at $308.41 per share, it is still trading 22% below its 52-week high of $395.41 from September 2025. Investors who bought $1,000 worth of Carvana’s shares 5 years ago would now be looking at an investment worth $1,664.
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