Carvana falls after posting worse-than-expected profit despite record revenue and vehicle sales

Used car seller Carvana posted its third-quarter earnings after the bell on Wednesday, and Wall Street responded by sending the stock down more than 10% after-hours.

The company posted earnings of $1.03 per share, compared to the $1.30 per share Wall Street anticipated. According to a company spokesperson, while Carvana doesn't report adjusted EPS, its EPS excluding certain impacts from a decline in value of root warrants would have been $1.50 per share.

The company said it expects its full-year earnings before interest and taxes to land at the upper end of its previous guidance (between $2 billion and $2.2 billion).

The company also:

• Booked $5.65 billion in revenue, up 55% from the same period last year and better than expectations of $5.1 billion.

• Sold 155,941 used vehicles to retail customers on the quarter, up 44% from last year and above the roughly 151,000 analysts polled by FactSet predicted.

With its retail sales growth, Carvana further closes its sales gap with rival CarMax, which sells significantly more used vehicles to customers despite having a market cap of about $72 billion less than Carvana’s. CarMax sold just shy of 200,000 vehicles to retail customers in its most recent quarter.

In recent months, Carvana shares have been hit by details of bankruptcy filings by companies like subprime auto lenders Tricolor Holdings and PrimaLend, as well as parts maker First Brands. Short sellers have raised alarms about Carvana’s likely exposure to riskier auto loans. In September, the share of subprime auto loans that were 60 or more days past due reached 6.5%, according to data from Fitch Ratings. US vehicle repossessions appear headed for a record-breaking year.

Earlier this year, the retailer said it’s aiming to sell 3 million retail units annually within 5 to 10 years. That lofty goal is more than 5x the number of vehicles Wall Street expects Carvana to sell this year.