Carvana Stock Drops 10% Thursday, Deepening Its Recent Rout. Here’s Why

Carvana stock backed into reverse on Thursday.

Shares of Carvana (CVNA) were down over 10% to $318 in recent trading after the online used car marketplace reported weakness in some key profitability metrics that outweighed solid sales numbers.

The company’s gross profit per unit declined year-over-year and came in below analysts’ expectations at $6,427 for the fourth quarter. The company said in its letter to shareholders that some costs were higher than anticipated.

Carvana also warned it could face elevated vehicle reconditioning costs in the first quarter, though it expects per-vehicle profits to improve.

For the full year, Carvana said it forecasts “significant growth” in vehicle sales volume and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), but the company declined to provide specific figures in its forecasts for the current quarter or full year.

Analysts from Wedbush and JPMorgan cut their price targets for Carvana to $425 and $490, respectively, following the results. Still, both firms said they remain bullish on Carvana’s potential for gains, pointing to its strong sales growth.

Carvana reported a 58% year-over-year jump in revenue to $5.6 billion in the fourth quarter, topping the analyst consensus compiled by Visible Alpha.

While ratings are still in flux, Wall Street analysts are widely bullish on the stock. Twelve of the 13 analysts tracked by Visible Alpha have issued “buy” or equivalent recommendations, compared to one neutral rating. Their average price target of $450 would suggest nearly 30% upside from the stock’s recent level.

With Thursday’s drop, Carvana shares have lost about one-quarter of their value since the start of the year.