Key Takeaways
- Carvana reports third-quarter results after the close on Wednesday, Oct. 28. In the second quarter, its adjusted EBITDA margin fell to 10.4% from 12.4%, mostly because of a change in how it books revenue on some vehicles.
- Major shareholder Cliff Sosin says Carvana’s infrastructure and brand leave “few scenarios where it works out really badly.”
- Analysts expect normalized EPS to rise 37% in 2027. Higher profit per car would help, but more sales and cheaper funding can lift earnings too.
- The number to watch is adjusted EBITDA per car against $4,085 a year ago. The stock trades at about 28x forward earnings, down from 63x at the end of 2025.
Carvana (CVNA) reports its third-quarter results after the close on Wednesday, Oct. 28. One of its biggest backers just argued that the downside is limited.
On the latest episode of Invest Like the Best, Cliff Sosin explained why he’s comfortable owning so much of the stock. Carvana made up about 79% of his firm CAS Investment Partners’ disclosed portfolio at the end of June, so this is a man talking his book. His reason:
“Carvana’s infrastructure and brand and everything else is just so differentiated that there are few scenarios where it works out really badly.”
He compared it to finding Walmart, Home Depot or Fastenal early, when spreading your money around would have kept you from getting the full benefit.
That’s a lot of conviction heading into a quarter where margins are the open question.
Record Units, Thinner Margins
Carvana’s second quarter showed growth at full speed. Revenue rose 52% to $7.38 billion, and retail units hit a record 197,325, up 38%. Revenue ran ahead of units mainly because Carvana now books certain cars from a large retail marketplace partner at their full sale price.
Reported gross margin fell to 18.8% from 22.0%, though that same revenue change muddies the comparison. Management said it was the main reason adjusted EBITDA margin fell to 10.4% from 12.4%, and it stops affecting year-over-year comparisons this quarter. Gross margin has now sat below 20% for three straight quarters:
Profit per car fell too, and Carvana chose part of that. It passed more than a percentage point of rate cuts on to its loan customers and was up against a tariff-related benefit of about $100 per car a year earlier. Higher fuel prices, rising benchmark rates and tight inventory added to the squeeze. CEO Ernie Garcia said on the second-quarter call that the rate cuts were “not something that we’ve been fully paid back for in growth.”
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Why Carvana Stock Fell on a Record Quarter
Record units weren’t enough last time. Carvana guided to full-year adjusted EBITDA of $2.7 billion to $3.0 billion, up from $2.24 billion in 2025. But the midpoint sat below Wall Street forecasts that clustered near or above $3 billion, and the stock dropped sharply the next day. Adjusted EBITDA rose 28% to $769 million in the quarter, even as adjusted EBITDA per car slipped to $3,897 from $4,195.
Three months on, consensus sits at $2.94 billion, near the top of that range. The Street is still betting on the high end.
Where Carvana’s 2027 Growth Has to Come From
Analysts expect normalized EPS to slip to $1.65 in 2026 from $1.69, then climb to $2.26 in 2027 and $2.61 in 2028:
That 2026 dip comes even though first-half pre-tax income rose 49% to $1.02 billion. A 37% jump in 2027 can come from more cars, cheaper funding or more profit on each sale. The second quarter showed the first two at work: total profit grew while profit per car fell, and net interest expense dropped to $101 million from $143 million.
Investors aren’t paying up for that. Carvana trades at about 28x forward earnings, down from 63x at the end of 2025 and below every quarter-end reading since its earnings turned positive in late 2024. Analysts’ 2027 estimates have risen over the same stretch.
What Wednesday Has to Show
- Adjusted EBITDA per car above $4,085, last year’s third-quarter figure. The second quarter’s $3,897 was up $311 from the first quarter.
- Inventory growing at least as fast as sales. On the second-quarter call, Garcia admitted that “inventory has undergrown sales over the last several months.”
- The full-year guide holding at $2.7 billion to $3.0 billion, or moving toward the $2.94 billion consensus.
Sosin’s Case Gets Its Next Test
Sosin’s long-term case looks stronger than a 28x multiple suggests to me, and Wednesday doesn’t need to be perfect. Profit per car already turned up from the first quarter to the second. A third-quarter figure above $4,085 would mark a return to year-over-year growth in adjusted EBITDA per car, and with the revenue change lapped, the margin comparison gets clean again too.
Fall short again, and it’s four quarters running without year-over-year growth in profit per car. That’s when the market starts pricing in the scenarios Sosin doesn’t see. One quarter won’t settle Carvana’s goal of 3 million cars a year at a 13.5% adjusted EBITDA margin by 2030 to 2035, but it will show whether the path still points there.
So what is Carvana stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
