Carvana (CVNA) shares surged 30% early Wednesday after the online auto retailer announced a debt restructuring deal ahead of the opening bell and a better-than-expected adjusted profit. bottom.
Company’s Debt restructuring plan will reduce its outstanding debt by more than $1.2 billion over the next two years by reducing interest expenses by $430 million annually by replacing existing unsecured debt with new bonds. The company also Sold up to $350 million We have added new inventory as part of this restructuring.
Carvana CFO Mark Jenkins said in a statement: “This transaction will allow us to reduce total debt and extend maturity as we continue to execute on our plan to significantly improve profitability and return to growth. “The reduction in short-term cash interest expense will significantly increase our financial flexibility.” .
the company too announced In the quarterly results, although vehicle sales were lower than expected, sales and profits exceeded expectations.
Carvana sold 76,530 vehicles in the quarter, below analyst expectations of 76,937.
The company posted revenue of $2.96 billion in the quarter, beating Street’s estimate of $2.55 billion, while adjusted EBITDA totaled $155 million, nearly triple analyst estimates of $57.5 million. became.
Carvana posted a loss of $0.55 per share, less than the $1.18 per share that Wall Street analysts expected, and 76% less than the $2.35 per share loss in the same period last year.
“Our strong execution has fundamentally improved our business and, coupled with today’s agreements with noteholders to reduce cash interest expense and total liability, we have completed a three-step plan and are back on track. It gives us great confidence that we are on the right path to get back to.” We are growing,” founder and CEO Arnie Garcia said in a release.
Calvana stock has been one of the stock market’s biggest winners this year, rising more than 700% after falling 98% from its summer 2021 peak. The stock is still more than 85% below its all-time high of $370.10. August 2021 has arrived.
The massive rise in stock prices is reminiscent of a pandemic-era “meme boom.” When the stock price goes up, it is driven up by short sellers betting that the price will go down.
The once-pandemic darling laid off workers last year to cut costs and preserve cash.Shares hit a 52-week low of $3.55 in December 2022 Amid bankruptcy speculation.
JP Morgan analysts recently downgraded the stock to underweight, citing “valuation.” [that] Once again, we are effectively disconnected from the fundamentals. ”
According to data analytics firm S3 Partners, short selling in Carvana has reached 47% of free float, which is a very high level.
“CVNA’s short squeeze will get tougher in the future.” [Wednesday’s] Prices are on the upside,” S3 Partners managing partner Ihor Dusaniwsky told Yahoo Finance Wednesday morning.
“We expect more short covering today and in the coming days as short sellers look for exits to reduce their exposure in highly unprofitable deals.”
Ines is a Senior Business Reporter at Yahoo Finance. follow her on her twitter @ines_ferre
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