Carvana Tumbles On Earnings But Morgan Stanley Sees Upside And 'Attractive Risk-Reward'

Carvana (CVNA) tumbled before the stock market open on Thursday after missing some fourth-quarter estimates on higher costs late Wednesday. Even as the S&P 500 component pulled back early Thursday, Morgan Stanley analysts said there is a big upside.

Carvana on Wednesday reported that Q4 earnings grew 463% to $4.22 per share with revenue totaling $5.65 billion, up 59% vs. a year ago. Prior to the earnings release, analysts projected quarterly EPS of $1.14 and sales coming in at $5.27 billion, according to FactSet.

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But Carvana reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $511 million vs. $535.7 million expected. The adjusted EBITDA margin of 10.1% missed estimates of 10.4%.

Carvana CEO Ernie Garcia said in the earnings release Wednesday that Q4 results were impacted by higher reconditioning costs of its vehicles, and it expects to see higher costs as well in Q1, though the company projects higher profit per unit.

When it comes to Carvana’s outlook, there isn’t much.

“Carvana expects significant growth in both retail units sold and adjusted EBITDA in full year 2026, including a sequential increase in both retail units sold and adjusted EBITDA in Q1 2026, assuming the environment remains stable,” Garcia said Wednesday.

Analysts forecast Q1 adjusted EBITDA of $671 million, with retail unit sales hitting 175,478, according to FactSet.

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S&P 500: Carvana Stock Performance

Carvana stock sank 9% before regular stock market action on Thursday, but that’s after diving more than 20% late Wednesday. CVNA stock rose 3% to 361.53, just shy of its 200-day line.

Despite the pullback on earnings, Morgan Stanley analyst Daniela Haigian on Thursday wrote the firm remains “convicted in the growth story” and that the decline Thursday “offers around 45% upside” to its 450 price target and “attractive risk-reward skew.”

“We see potential for upside towards 40% retail unit growth in 2026 via continued execution,” Haigian wrote Thursday.

The S&P 500 stock enters Thursday down more than 14% in the 2026 stock market, making it one of the worst performing stocks in the S&P 500 index.

Carvana broke out from a consolidation base in early December at a buy point of 401. It then managed to rise to a high of 486.89 on Jan. 23. However, the S&P 500 component has declined 26% since that level, falling below both its 50-day and 200-day moving averages.

Carvana stock has seen major shifts over the past several years. In August 2021, shares peaked at around 376. About 16 months later, the stock lost almost 99% of its value, trading around 3.55 a share in December 2022. From those lows, it began a run-up that took it all the way to its all-time close of 479.33 earlier this month.

The S&P 500 stock has a 77 Composite Rating. Carvana also has a 73 Relative Strength Rating and a 79 EPS Rating.

Please follow Kit Norton on X @KitNorton for more coverage.

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