Carvana reports wider loss in Q4 as falling used-car prices weigh; analyst sees uncertainty
Investing.com -- Carvana reported Thursday a much wider than expected loss as a fall in used-car prices and spike in interest rates drove up costs.
Carvana Co (NYSE: CVNA) shares are down almost 5% in pre-market trading following the report.
The e-commerce used-car platform reported a loss of $7.61 a share on revenue of $2.84 billion, compared with street estimates for a loss of $2.12 a share on revenue of $3.07B.
Retail units sold slumped 23% to 86,977, with total gross profit per unit falling by $2,347 to $2,219.
Looking ahead, the company warned of a further drop in sales, forecasting a “sequential reduction in retail units sold in Q1 2023 compared to Q4 2022.”
Still, Carvana touted a route to profitability on expectations that sales volume will stabilize and the reduction in inventory will boost retail gross profit per unit in the subsequent quarter after Q1.
"On GPU, we currently expect a sequential increase in Total GPU in Q1 2023 compared to Q4 2022," the company said.
“We expect the combination of these three factors to lead to significantly improved Adjusted EBITDA over the next two quarters,” it added.
Bank of America analyst Nat Schindler hiked the price target by $2 to $12 per share on Neutral-rated CVNA shares.
The analyst believes Carvana's long-term opportunity still remains. However, he warns that Carvana could run out of cash by the end of the year.
"There is a possibility of a cash infusion, but it is impossible to predict if and when that would occur. This combined with the high short interest can create a situation where this stock's performance looks binary: either it could go to zero or it would be worth many times its current price of $10.08, and assigning probabilities for the catalysts that would determine these outcomes (such as a cash infusion) is impossible," Schindler wrote in a note.
By Yasin Ebrahim and Senad Karaahmetovic