The stock reversed earlier losses to rally in pre-market trading on Wednesday after posting its best-ever quarter for earnings, and announcing a debt restructuring deal.
The used car retailer has also launched plans to raise up to $1 billion by selling up to 35 million shares through a market offering, according to a Securities and Exchange Commission filing.
The stock was up 46% at one point in pre-market trading, and it’s been rallying 38% higher in the last check.
Shares initially fell 10% in the pre-market session after the company spooked investors by presenting its second-quarter earnings for two weeks. But investors had no reason to worry.
Carvana said the second quarter was its best ever for adjusted Ebitda — $155 million — and for earnings per unit, which came in at $6,520. The online auto retailer reported $2.97 billion in revenue in the second quarter, beating expectations of $2.6 billion, according to FactSet data. It posted a net loss of 55 cents per share, better than the $1.20 loss per share estimated by analysts.
The online auto retailer also announced an agreement for reduce their outstanding debts With more than $1.2 billion, which seems to be the reason behind the turnaround in her earnings history. The company said the agreement with the bondholders will eliminate more than 83% of the unsecured bond maturities for Carvana 2025 and 2027 and reduce required cash interest expense by $430 million annually over the next two years.
“The strong performance of our business in 2023 provided an opportunity for an impactful and win-win transaction for Carvana and its large unsecured owners,” said Chief Financial Officer Mark Jenkins. He added that the deal “significantly increases our financial flexibility.”
The stock is up 740% to $39.80 so far in 2023, as of Tuesday’s close. On Tuesday, the shares closed up 9%.
“We applaud CVNA’s ability to improve its profitability and restructure its balance sheet in the future [a] Time unit demand remains weak, said Michael Baker, an analyst at DA Davidson. Maintain a Neutral rating on the stock with a price target of $18.
JP Morgan analysts downgraded the stock to Underweight from Neutral on Friday, arguing that Carvana’s valuation has outpaced the level warranted by recent improvements in the business. They have a price target of $10 per share, which closed at $39.80 on Tuesday.
Write to Callum Keown at [email protected]
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”