Carvana Q4: Another Precisely Projected Quarter

JXCE projections for Carvana’s fourth quarter once again proved to be highly predictive. JXCE projected retail sales of 164,100 units, coming within 0.35% of Carvana’s reported 163,522 units. Retail ASP was also down as anticipated. However, retail ASP did not decline as much as expected due to better attach rates. ASP projections stem from several factors, including the list price of sales, retail marketplace sales percentage, delivery fees, retail marketplace GPU, and attach rate. While the first two factors are well known, the remaining three — delivery fees, retail marketplace GPU, and attach rate — are more variable and not as easily tracked. The company commented on lower delivery fees this quarter and a better attach rate, but I also suspect higher GPU on retail marketplace transactions contributed as well.

Further, retail sales data made it clear that Carvana expanded its delivery network in Q4, which was later confirmed on the quarterly call. The call also confirmed the larger-than-normal depreciation that had been projected, with inventory age increasing by nearly 20% serving as a contributing factor. All in all, this was an accurately covered quarter, and I am watching developments in retail sales volumes, ASP shifts, and new car sales for my customers very closely this quarter. While new car sales may represent a small fraction of overall sales, the company disclosed in its 10-K that it “acquired five franchise dealerships for total purchase consideration of $160 million."

In conclusion, the quarter reinforces the value of disciplined, data-driven forecasting. When underlying KPIs are tracked closely and interpreted in context, performance becomes far less surprising and far more measurable.