Carvana accelerates car-buying business

Carvana continues to ramp up the number of cars it’s buying from consumers, according to fourth-quarter earnings report released yesterday.

Full year 2019, cars purchased from consumers increased 231% year over year to 104,000 units, Chief Executive Ernie Garcia said during the call. Retail units sold totaled 177,549 — a 89% YoY increase — for a total YoY revenue growth of 101% to $3.94 billion. $1.1 million of that revenue came in the fourth quarter of 2019.

“When combining total retail units sold with stand-alone vehicle purchases, we transacted with over 256,000 customers, an increase of 231%,” Garcia explained.

Back in November 2018, when Carvana first announced its plan to ramp up its car-buying side of the business, only 16% of the cars sold on its platform had been purchased from other customers, Garcia said.

“We didn’t know just how many cars we could buy from our customers or how long it would take us to make significant progress,” he continued. “We put out an ambitious long-term goal of sourcing 38% to 52% of the cars we sell from our customers.

Carvana was able to source 43% of the cars sold on its platform from its customers in the fourth quarter of last year. “This is potentially the most remarkable progress we’ve made in any area of the business in any year,” Garcia said.

Yet, such growth comes with short-term costs, Garcia added, noting that the costs of “expanding the company so quickly sets us up very well to achieve our long-term goals.”

The Tempe, Az.-based online used-car retailer missed on earnings per share, posting a loss of $0.79 per share, compared to expected loss of $0.62 per share, according to consensus estimates by Zacks Investment Research.

Shares of Carvana (NYSE:CVNA) dropped 11.6% to $89.78 at press time. It has a market capitalization of $13.6 billion.