Fundamental Analysis

1. Earnings Expectations:
   • EPS: Expected at $0.2888, a significant YoY turnaround from a ($1.00) loss but a QoQ decline from $0.64.
   • Revenue: Expected at $3.32 billion, showing a 37.2% YoY growth but a 9.3% QoQ decline, reflecting seasonal trends.
2. Key Positive Catalysts:
   • Operational Strength: Carvana reported record EBITDA margin of 11.7% and operating margin of 9.2% in Q3, setting an industry benchmark.
   • Volume Growth: Retail units sold increased 34% YoY in Q3, a sign of growing demand.
   • Cost Efficiencies: Expanded ADESA reconditioning centers, cutting delivery distances by 300 miles, leading to cost reductions.
   • Brand Strength: Increased advertising and financing revenue streams (loan origination expansion).
3. Potential Risks:
   • Seasonality Impact: Q4 is historically weaker for used car demand, which may lead to marginal EBITDA compression.
   • Interest Rate Sensitivity: Higher borrowing costs can squeeze affordability for consumers, impacting sales.
   • Execution Risks: Integrating ADESA operations at scale poses logistical challenges.

Technical Analysis

1. Resistance & Support:
   • Resistance: Strong near $286–$290. A breakout above this level could trigger further upside.
   • Support: Near $272, with a stronger base between $250–$260.
2. Momentum Indicators:
   • RSI: Extremely high (112–175+), indicating overbought conditions—potential for a correction.
   • ADX: Above 50, confirming a strong uptrend, but signs of stabilization suggest possible consolidation.
   • Volume: Higher than average (~3.4M vs. 3.1M avg), confirming buying interest.

Earnings Reaction Prediction

• Bullish Case: If Carvana beats estimates, demonstrates sustained profitability, and provides a strong Q1 guidance, stock could break past $290+.
• Bearish Case: If results miss expectations, EBITDA margins show unexpected deterioration, or management signals weaker unit growth, stock could pull back to $265–$272.
• Neutral Scenario: Inline results with reaffirmed guidance may lead to consolidation between $272–$286 before the next trend.

Conclusion

Carvana has a strong fundamental turnaround story but faces seasonal weakness and macro risks (interest rates, affordability). With overbought technical conditions, a short-term pullback is likely unless the earnings surprise exceeds expectations. Investors may look for a breakout above $290 or a buying opportunity near $265–$272 on any post-earnings dip.