By Aishwarya Nair and Priyamvada C
(Reuters) – Shares of used-car retailer Carvana Co fell about 2% in premarket trading on Friday, as analysts feared the debt-laden company’s upbeat second-quarter earnings forecast was only a hit. a “one-time” gain.
Shares rose 68% on Thursday to $26.09 with help from traders hedging their bearish bets after the company forecast more than $50 million in adjusted core profit for the current quarter, beating expectations for most analysts.
While analysts were encouraged by the outlook, they don’t believe the gain is sustainable as the company struggles to sell acquired cars at high prices as buyers limit spending amid fears of a looming recession and taking on a multitude of costs. – cutting measurements.
They believe the improved outlook is the result of the sale of financing receivables.
“We believe the receivables sale is likely once in a while as CVNA pushed back receivables sales in 4Q22 and the banking crisis in 1Q23 dampened receivables sales,” said DA Davidson analyst Michael Baker.
Carvana, known for its car vending machines, said it had sold or securitized loans worth about $2 billion as of June 8, compared with $1.3 billion in loans sold or securitized as of May 4.
Analysts also echoed concerns about the company’s plans to return to growth profitably given the existing debt load.
“We found management’s commentary on returning to profitable growth while potentially exploring capital markets as difficult to reconcile given the existing debt load and the difficulty of maintaining unprecedented fixed cost efficiency. in the midst of this rebound,” said RBC analyst Brad Erickson.
Last month, the company said it expects to post a profit in the current quarter and plans to further reduce excess used-car inventory.
“Volume continues to decline year over year,” Carvana chief Ernest C. Garcia said at a William Blaire conference on Thursday.
(Reporting by Priyamvada C in Bengaluru; Editing by Shinjini Ganguli)