Carvana Stock Drops 8% as Car Repair Costs Hurt Quarterly Earnings

Online used car dealer Carvana saw its stock price fall 8% Thursday after reporting higher-than-expected costs for fixing up vehicles hurt fourth-quarter profits. The company blamed increased expenses for inspecting, repairing and detailing cars at multiple locations, along with higher depreciation rates.

Stock prices for online used car dealer Carvana dropped approximately 8% Thursday following disappointing fourth-quarter earnings results that showed rising vehicle repair expenses cutting into company profits.

The decline came after Carvana reported that costs for preparing used vehicles for sale exceeded expectations during the final quarter of 2024. The company explained that expenses for inspecting, fixing and cleaning cars at multiple facilities throughout their network were higher than anticipated.

Economic pressures from ongoing inflation and tariff-imposed price increases on new vehicles have pushed American car buyers toward alternative purchasing strategies. Many consumers are postponing new car purchases, choosing less expensive vehicle models, or turning to the used car market instead.

Although used vehicle sales have remained steady, automotive retailers are facing financial challenges from tariffs and inflation that have increased both reconditioning expenses and vehicle depreciation rates.

Following Wednesday’s after-hours earnings announcement, at least four financial firms including J.P. Morgan and RBC Capital Markets reduced their stock price predictions for Carvana.

The company stated that expenses were impacted by larger-than-projected costs associated with vehicle preparation activities across several production facilities during the quarter. Additionally, increased retail depreciation rates created additional financial pressure on a per-vehicle basis.

These disappointing financial results arrive just months after the retailer, recognized for its distinctive multi-story car vending machines, concluded 2024 by earning inclusion in Wall Street’s prestigious S&P 500 index, having previously dismissed criticism from short-selling investors.

Stephens financial analyst Jeff Lick described the stock decline as a possible buying opportunity for investors, noting that even minor disappointments can cause significant price swings in highly-valued companies like Carvana.

The company’s shares have historically attracted individual investors, driving multiple social media-fueled trading surges in recent years that have consistently caught hedge funds with negative positions off guard.

On Wednesday, Carvana dismissed new accusations from short-selling firm Gotham City Research claiming the company inflated its 2023-2024 earnings by over $1 billion.

Short-selling positions in Carvana stock remain high but have decreased slightly since January began, with approximately 14.84 million shares sold short, accounting for roughly 10.7% of the company’s available trading shares as of February 17, according to Ortex data analytics.