Online used car retailer Carvana (CVNA) reported 4Q21 earnings after the close Thursday. 4Q21 results were fine with units sold +1% to 113,016 and revenue +8% to $3.75 billion compared to 3Q21.

The issue is bad 1Q22 guidance due to inflation and supply chain issues. The average used car price in CVNA’s inventory is +30% since January 2021 controlling for mix. That is pricing a lot of lower-income consumers out of the market. For example, sales to customers with incomes below $50k in January 2022 grew 30 points lower than the company’s growth as a whole. In addition, due to Omicron and severe weather events, hourly employee callout rates are up significantly leading to inefficiencies, delays, and cancellations. Put it all together and CVNA is guiding 1Q22 EBITDA margin to negative mid-single digits.

Nevertheless, a 70% decline over the last 6 months combined with CVNA’s strong brand and terrific growth make this hiccup an opportunity to nibble on shares at a discount. CVNA has a long road ahead but I’m confident it will reach its destination.

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