Carvana Co. (CVNA) had one of those classic Wall Street moments Thursday: beat on revenue, get hammered anyway. The online used-car retailer delivered better-than-expected top-line numbers for the fourth quarter, but investors focused on what was happening underneath the hood—and they didn't like what they found.

The Numbers Tell Two Stories

Carvana reported fourth-quarter revenue of nearly $5.6 billion, comfortably ahead of the $5.26 billion analysts had penciled in. Earnings came in at $4.22 per share. On paper, that looks pretty good.

But according to Reuters, the company got hit with higher-than-expected costs from vehicle inspections, repairs, and detailing across multiple production sites during the quarter. Add in elevated retail depreciation, and suddenly those per-unit economics started looking a lot tighter. In the used car business, margins per vehicle matter—and when costs creep up faster than expected, investors get nervous.

The Road Ahead

Management isn't backing down from its long-term vision. Executives outlined plans to grow both retail sales volume and adjusted EBITDA throughout 2026, with sequential improvement expected starting in the first quarter as operational efficiency picks up.

CEO Ernie Garcia struck an optimistic tone: "We remain firmly on track to our goal of selling 3 million retail units a year at a 13.5% Adjusted EBITDA margin by 2030 to 2035." That's an ambitious target—think about tripling or quadrupling current volumes while maintaining healthy profitability. The company says it plans to prioritize scalable profitability while keeping a tight grip on inventory management.

Short Seller Drama Continues

Making matters messier, Carvana is still dealing with accusations from short seller Gotham City Research. Last month, Gotham claimed the company overstated earnings for 2023-2024 by more than $1 billion and relies too heavily on related parties for financial stability. The report also predicted that Carvana's upcoming 10-K filings would be delayed and might require restatements.

Carvana isn't having it. A company spokesperson told MarketDash in January that the report is "inaccurate and intentionally misleading," emphasizing that all related-party transactions are properly disclosed. According to Reuters, the company continues to push back firmly against the allegations.

What the Analysts Say

Not everyone is bailing out. Needham analyst Chris Pierce reiterated a Buy rating with a $500 price target. BTIG analyst Marvin Fong also maintains a Buy rating, though he trimmed his price forecast from $535 to $455—still well above where shares were trading Thursday morning.

CVNA Price Action: Carvana shares were down 16.57% at $301.61 during premarket trading on Thursday, according to market data.