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Stock Markets February 19, 2026

Carvana Shares Slide After Quarterly Profit Miss, Reconditioning Costs Cited

Retail-focused used-car seller reports higher inspection and repair expenses; shares plunge in premarket trade

By Jordan Park CVNA
Carvana Shares Slide After Quarterly Profit Miss, Reconditioning Costs Cited
CVNA

Carvana's stock fell sharply in premarket trading after the online-only used-vehicle retailer reported a fourth-quarter profit that missed Wall Street expectations. Management attributed the shortfall to larger-than-expected inspection, repair and detailing costs across multiple production sites and to higher retail depreciation rates that weighed on per-unit profitability. The results, released post market hours, prompted multiple brokerages to cut price targets and coincided with renewed scrutiny from short sellers.

Key Points

  • Carvana reported fourth-quarter profit below Wall Street expectations, with management citing elevated inspection, repair and detailing costs across several production sites.
  • Higher retail depreciation rates further compressed per-unit profitability, contributing to the earnings shortfall.
  • Market reaction included at least four brokerages cutting price targets, and the stock fell sharply in premarket trading, reflecting reassessment by analysts and investors; this affects automotive retail and equity markets tied to retail-trader-driven momentum.

Overview

Shares of the online-only used-car retailer sank in premarket trading on Thursday, after the company disclosed fourth-quarter profit that fell short of what analysts had expected. The stock was last down 16% at $302, which would mark its lowest opening level since early November 2025 if the decline maintained into the session.

Drivers of the shortfall

The company said the quarter's results were pressured by higher-than-anticipated costs related to inspection, repair and detailing of vehicles at several production sites. Management also cited increased retail depreciation rates, which added further strain on profitability on a per-unit basis. The earnings and explanatory commentary emerged after markets closed on Wednesday.

Market response

Following the disclosure of the results, at least four brokerages reduced their price targets on the stock, including J.P. Morgan and RBC. The downgrade activity contributed to the steep premarket decline.

Context on investor interest and scrutiny

The stock has been a longstanding retail-investor favorite and has experienced meme-driven rallies that have at times caused losses for hedge funds holding short positions. On Wednesday, the company rejected fresh allegations from the short seller Gotham City Research that it overstated earnings for 2023-2024 by more than $1 billion. Short interest among shares available for trading stood at about 7%, based on LSEG-compiled data.

Implications

The immediate market reaction reflects investor focus on operational cost pressures and the potential margin impact from higher retail depreciation. Broker cuts to price targets signal a reassessment by sell-side analysts following the results and management's cost disclosures.

Conclusion

Carvana's fourth-quarter report and accompanying explanation of elevated reconditioning and depreciation costs triggered a sharp sell-off in premarket trading and prompted multiple brokerages to reduce their valuations of the shares. The company continues to face activist scrutiny from short sellers while remaining a notable retail-investor name in the equity market.

Risks

  • Continued elevated reconditioning costs at production sites could further pressure margins and earnings - this primarily impacts the automotive retail sector and companies with similar operational models.
  • Higher retail depreciation rates may sustain per-unit profit headwinds, increasing earnings volatility for used-vehicle retailers and influencing investor sentiment in equity markets.
  • Ongoing scrutiny from short sellers and shifting analyst price targets can amplify share-price volatility, especially given the stock's history of retail-driven rallies; this is a risk for capital markets and institutional investors exposed to the name.

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