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Carvana Q3 2022 sales, earnings dip, causing stock fall

Image provided by Carvana.

November 7, 2022

Carvana, an e-commerce platform for buying and selling used cars online that offers a car vending machine, suffered a dip in sales and earnings for Q3, 2022, according to a shareholder's letter from Ernie Garcia III, chairman and CEO, and Mike Jenkins, CFO. Highlights include:

• Net sales fell 3% from $3.48 billion in Q3 2021 to $3.386 billion in the quarter ending Sept. 30, 2022.
• Net loss extended from $68 million to $508 million in the comparative quarters.
• Net loss per share rose from 38 cents to $2.67.
• Retail units sold fell 8.4% from 119,494 units to 102,570 units due to a variety of internal and external factors, including industry-wide used vehicle prices, interest rates, other macroeconomic forces and Carvana's own actions to drive profitability, including passing benchmark interests through to origination rates, reducing advertising and lowering inventory size.

Shares traded Friday at $8.76 against a 52-week range of $8.37-$304.33.

Morgan Stanley's Adam Jonas, who has supported Carvana's business model, pulled his stock rating following the Q3 2022 results and negative forecast for the fourth quarter, according to Seeking Alpha.

"In Q4, we expect a sequential reduction in retail units sold and total GPU as the impacts of reduced used vehicle industry demand, increasing benchmark interest rates, higher used vehicle depreciation rates and our profitability initiatives flow through," Garcia and Jenkins said in the letter.

"Looking toward 2023, we are not providing a quantitative outlook at this time," Garcia and Jenkins continued in the letter. "In light of current industry and macroeconomic conditions, we believe forecasting the environment over the coming months and quarters is difficult, and we plan instead to provide more real time color on how certain key dynamics are likely to impact our results."