July 20, 2024

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Carvana reports its best quarterly profit ever. The stock is mounting.

Carvana reports its best quarterly profit ever.  The stock is mounting.

Carvana stock reversed earlier losses to rally in pre-market trading on Wednesday after reporting its best-ever quarter for earnings, and announcing a debt restructuring deal.

The stock was up 46% at one point in pre-market trading, and up 18% at 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 profit 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.

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“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.”

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The stock is up 740% so far in 2023 as of Tuesday’s close. On Tuesday, the shares closed up 9%.

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.

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Write to Callum Keown at [email protected]