June 9 (Reuters) – Shares of used car retailer Carvana fell 12.5 percent in afternoon trade Friday, as analysts suspect the debt-laden company’s second-quarter earnings outlook is a “one-off.” Upside down.
Shares rose earlier in the session. On Thursday, they rose as much as 68% to $26.09 with some help from traders covering their bearish bets after the company forecast more than $50 million in adjusted core earnings for the current quarter, beating most analysts’ expectations.
While analysts were encouraged by the outlook, they expected more gains as the company struggled to sell vehicles acquired at high prices, with buyers constraining their spending due to fears of an impending recession, and took a slew of cost cuts. Sizes.
They believe that the improved outlook was the result of the sale of receivables.
“We believe the sale of receivables is likely to be of a one time nature as CVNA drove receivables sales in Q4 2022 and the banking crisis in Q1 2013 was a drag on receivables sales,” said Michael Baker, analyst with DA Davidson. .
Carvana, known for its auto vending machines, said it had sold or raised $2 billion in loans as of June 8, compared to $1.3 billion sold or securitized as of May 4.
Analysts also echoed concerns about Carvana’s plans to return profitably to growth given its current debt burden.
“We found management’s commentary on returning to growth profitably with the prospect of capital markets exploration difficult to reconcile with the current debt load and the difficulty of maintaining unprecedented flat cost efficiency amid this recovery,” said RBC analyst Brad Erickson.
Last month, Carvana said it expected to turn a profit in the current quarter and plans to reduce excess used car inventory.
“Volume is still down year-over-year,” Carvana President Ernest C. Garcia said at a conference call Thursday.
Additional reporting by Priamvada C in Bengaluru; Edited by Chingini Ganguly
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