Carvana Stock Plunges After Earnings. Warning Sign or Buying Opportunity?

Core Insights - Carvana has experienced a remarkable recovery, gaining 700% over the last three years after avoiding bankruptcy during the 2022 bear market, although it was down over 98% from its peak at one point [1] - The company reported a record revenue growth of 55% in Q3 2025, reaching $5.65 billion, significantly surpassing analysts' expectations [2] - Despite strong financial results, Carvana's stock declined by 14% following concerns about rising auto loan delinquencies and potential declines in retail unit sales [3] Financial Performance - Carvana's adjusted EBITDA rose 45% to $429 million, while GAAP net income increased by 78% to $263 million, equating to $1.03 per share [2] - Adjusted earnings per share were reported at $1.50, exceeding the consensus estimate of $1.32 [2] Market Position and Strategy - Carvana is targeting an ambitious goal of selling 3 million vehicles over the next 5 to 10 years, aiming for an adjusted EBITDA margin of 13.5% [5] - The company is positioned in a nearly $1 trillion addressable market, justifying its premium stock valuation despite recent price fluctuations [5] Investor Sentiment - The stock's recent pullback is attributed to investor fears regarding narrowing margins and rising auto loan delinquencies, although management's guidance indicates a seasonal decline in retail unit sales [3][6] - The overall business remains healthy, with narrowing margins not seen as a significant warning sign [6][7]