Carvana Co. (NYSE: CVNA) the largest online used car retailer in the US, announced that it will report a profit in the second quarter of this year, which has led to a 24.44% surge in its shares on Friday. The company had reported a Q1 adjusted EPS loss of $1.51, which was better than what analysts had expected, with expectations of $1.96 EPS loss. While the adjusted EBITDA for the quarter was negative $24 million, Carvana has stated that it will be positive in the current quarter.
In a statement, Carvana CEO Ernie Garcia expressed his confidence in the company’s future outlook, saying, “The first quarter was a big step in the right direction and there are more steps to come. Given our strong start to the year, we expect to achieve positive adjusted EBITDA in Q2 2023. It is clear our strategy and execution are working as evidenced by our 61% increase in gross profit per unit, the best first quarter GPU in company history.”
Carvana also announced that it sold 79,240 retail units and generated $2.606 billion in revenue during the first quarter, marking a 25% decrease in both metrics as compared to the same quarter last year. However, the company attributed this decline to its focus on prioritizing profitability initiatives. Despite selling fewer cars, Carvana managed to increase its non-GAAP GPU (gross profit per unit) to $4,796, a significant rise of 61% in Q1 as compared to the previous year.
Carvana’s recent success may also be attributed to the company’s operational improvements, as well as a stabilization of used-car market prices. However, despite the positive momentum, Carvana’s stock price has been declining due to its high debt load, which currently stands at $8.7 billion. This debt burden is in sharp contrast to the company’s cash reserves, which were reported to be only $488 million at the end of Q1.
Meanwhile, Carvana has been making efforts to reduce its debt burden by offering new private debt exchange deals. However, last week the company received a boost in its share price when it was reported that approximately 90% of Carvana’s bondholders offered a debt-for-equity swap. The bondholders have also proposed the exchange of some of Carvana’s interest expense with an additional debt, commonly referred to as a payment-in-kind.
According to Oppenheimer analyst Brian Nagel, a successful and significant debt-for-equity swap at Carvana is likely to have a positive impact on the company’s shares. Nagel referred to the swap as a potentially “BIG lifeline” for Carvana, and while there may be some uncertainties, he believes that such a swap would be beneficial for the company. Nagel expressed his views in a note to clients.

Larry Norris is a journalism graduate with keen interest in covering news – specifically top trending. He has as a keen eye for technologies and has predicted quite a few successful startups over the last couple of years. Larry goal with this website is to report accurately on all kinds of stock news, and have a great deal of passion for technical and active reporting. Larry is diligent and proactive when it comes to news reporting.
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