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Carvana stock plummets as earnings are hit by a ‘uniquely challenging environment’

Carvana stock plummets as earnings are hit by a ‘uniquely challenging environment’

After Carvana Co.’s admission that it faced both industry-wide as well as company-specific challenges in the first quarter of its business, shares of the company were pressed in after-hours trading on Wednesday. However, the company believes it is gaining share in the used vehicle market.

Carvana
CVNA,
-9.11%
In its letter to shareholders, the company noted that the omicron variant of used-car prices and the broader industry were both factors impacting the quarter. The company also addressed some issues related to reconditioning logistics network disruptions and other issues.

The company stated in its letter that we usually prepare for sales volume 6-12 month in advance. This means we built capacity in most business functions to handle significantly more volume than we fulfilled during Q1. Because our costs were relatively fixed in the short-term, lower retail unit volumes led to higher unit prices.

Aftermarket trading Wednesday saw shares fall more than 21%. They fell 9% during Wednesday’s regular session.

Carvana reported a net loss in the most recent quarter of $506 million, compared to a loss of $82million a year ago. It reported a net loss $260 million due to the company, while it generated a loss of $36 millions on the same metric one year earlier.

Carvana lost $2.89 per share in the quarter compared to 46 cents a previous year. According to FactSet, the share loss was $1.58.

Revenue rose to $3.5 Billion from $2.2 Billion, while analysts tracked and modeled by FactSet were projecting $3.4 billion.

In its shareholder letter, the company stated that while we were in a unique environment during the first quarter, we are already seeing positive trends across all our key metrics.

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Carvana did not provide specific guidance for the balance 2022 due to current industry trends that impact customer affordability, high used vehicle prices, rapid movements of interest rates, rapid rises in fuel prices, and other macroeconomic uncertainty.

Carvana’s shareholder letter was blunt. It acknowledged that the quarter was difficult, but also noted that the company sees a chance to improve the business partly due to weaknesses that were discovered in the current environment.

The quarter was undoubtedly a setback in our financial results. However, we will continue to work hard to make it a marker of an even greater step forward in achieving the goal of becoming the largest and best-profitable automotive retailer, the letter stated.

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