Carvana shares fall as analysts call Q2 earnings forecast ‘one-time’ upside

June 9 (Reuters) – Shares in used car dealer Carvana Co ( CVNA.N ) fell 12.5% ​​in afternoon trade on Friday, as analysts suspect the debt-laden company’s upbeat second-quarter earnings forecast is a “one-off” up.

Shares rose earlier in the session. On Thursday, they had risen as much as 68% to $26.09 with some help from traders hedging their bearish bets after the company forecast more than $50 million in adjusted core earnings for the current quarter, beating most analysts̵[ads1]7; expectations .

While analysts have been encouraged by the outlook, they expect more gains as the company has struggled to sell cars acquired at high prices, with buyers curbing spending amid fears of an impending recession, and has taken a number of cost-cutting measures. measurements.

They believe the better outlook was a result of the sale of receivables.

“We believe the sales of receivables are likely to be a one-off as CVNA was pushed by the sale of receivables in 4Q22 and the banking crisis in 1Q23 was a drag on the sale of receivables,” said Michael Baker, analyst at DA Davidson.

Carvana, known for its automated teller machines, said it sold or securitized loans worth about $2 billion as of June 8, compared with $1.3 billion sold or securitized as of May 4.

Analysts also echoed concerns about Carvana’s plans to profitably return to growth given its existing debt load.

“We found management’s comment about returning to profitable growth while potentially exploring the capital markets difficult to reconcile given the existing debt burden and the difficulty of maintaining unprecedented fixed cost efficiency amid this recovery,” said RBC analyst Brad Erickson.

Last month, Carvana said it expected to post a profit in the current quarter and planned to further reduce excess used car inventory.

“Volume continues to decline year over year,” Carvana CEO Ernest C. Garcia said on a conference call Thursday.

Reporting by Priyamvada C in Bengaluru; Editing by Shinjini Ganguli

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