June 9 (Reuters) – Shares of used-car retailer Carvana Co ( CVNA.N ) fell 11% in afternoon trading on Friday, as analysts suspected the company’s upbeat second-quarter profit forecast was a ‘one-time’. company full of debt. upside down.
Shares rallied earlier in the session, and were up about 68% to $26.09 on Thursday as traders hedged their bearish bets after the company forecast more than $50 million in current quarter adjusted core profit, which exceeded most analysts’ expectations.
Although analysts are encouraged by the outlook, they do not expect further gains as the company struggles to sell cars it has acquired at high prices, with consumers restricting their spending due to concerns of an impending recession.
They believe that the improved outlook is a result of revenues from the sale of outstanding invoices.
“We believe the sale of receivables is likely to be one-time in nature as CVNA pushed up sales of receivables in 4Q22 and the banking crisis in 1Q23 was a drag on sales of receivables,” said by Michael Baker, analyst at DA Davidson.
Carvana, known for its car-vending machines, said it sold or securitized loans worth about $2 billion on June 8. It sold or securitized $1.3 billion on May 4.
Analysts also echoed concerns about Carvana’s plans to return to profitable growth given its existing debt load. The retailer did not immediately respond to questions about its debt.
“We see management’s commentary on the return to growth being profitable while potentially exploring capital markets that are difficult to reconcile given the existing debt load and the difficulty of maintaining an unprecedented fixed cost efficiency amid the rebound that,” said RBC analyst Brad Erickson.
Meanwhile, brokerage Raymond James said that even if the company manages to achieve positive adjusted EBITDA in 2023, it will come at the expense of revenue growth.
Reporting by Priyamvada C in Bengaluru; Editing by Shinjini Ganguli
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