US used-car retailer Carvana Co. reported second-quarter earnings on July 29, setting new highs in both sales volume and profit, driven by elevated new-car prices boosting demand for used vehicles. However, the company's full-year earnings guidance fell short of market expectations, causing its stock to plunge approximately 15% in after-hours trading.

Carvana Co. sold about 197,000 vehicles in the second quarter, a nearly 40% increase year-over-year. Revenue surged 52% to $7.38 billion, while profit reached $310 million, up significantly from $183 million in the same period last year. Management noted this marks the 10th consecutive quarter of growth, with retail sales doubling over the past two years. Currently, Carvana Co. holds roughly a 2% share of the US used-car market, indicating substantial room for expansion.

The strong performance is set against a backdrop of persistently rising new-car prices in the US. Since the COVID-19 pandemic, the average price of a new vehicle has climbed to around $50,000, pushing about 1 million potential buyers out of the new-car market, prompting them to shift to used cars or extend the lifespan of their current vehicles. Carvana Co. has disrupted traditional brick-and-mortar dealership models by offering fixed pricing and online delivery services to attract consumers.

CEO Ernie Garcia III highlighted notable business breakthroughs among high-income demographics. Data shows that sales from customers earning over $100,000 annually grew more than 60% year-over-year. Despite the stellar quarterly performance, Carvana Co.'s financial guidance missed Wall Street targets. The company projects full-year earnings between $2.7 billion and $3 billion, below some analysts' estimates exceeding $3 billion, directly triggering sharp after-hours stock volatility.

CFO Mark Jenkins stated that the current guidance is designed to set a reasonable range for second-half expectations. He revealed that business growth in the US Midwest and Northeast regions has exceeded 50%, with the overall trajectory remaining strong. Garcia also acknowledged that inventory growth lagged behind sales volume through mid-second quarter, but supply chains have since normalized.

While solidifying its used-car core business, Carvana Co. is gradually expanding into new-car sales. The company recently acquired several dealerships from automaker Stellantis and launched a new store model featuring smart devices and digital screens. These moves have raised concerns among traditional new-car dealers protected by strict state franchise laws. Regarding new-car plans, Garcia emphasized that the business is still in its early stages. He confirmed that the new-car segment is already profitable but declined to provide further specifics.