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Carvana stock (CVNA) rose as much as 40% on Friday after the used car platform posted its first-ever annual profit and issued better-than-expected guidance.
Following this result, the company’s management celebrated the victory at Thursday’s earnings conference.
“It’s very difficult for a group to go through a period like the last two years and not collapse under pressure. We did not collapse,” Carvana CEO and Chairman Ernie Garcia told analysts. Told.
In its latest financial results, Carvana reported net income of $150 million in 2023, thanks to gains from debt reduction.
The company expects its retail division to grow slightly on a year-over-year basis this quarter, with adjusted core earnings “significantly above $100 million.”
As a result, the company, which was facing bankruptcy speculation in December 2022, turned around and saw its stock price fall to $3.55.
On Friday, the stock was hovering around $70 per share.
Over the past two years, the Tempe, Arizona-based company has focused aggressively on achieving profitability and reducing debt at the expense of short-term growth. Carvana, once a pandemic darling, announced layoffs in 2022 to cut costs and preserve cash.
Since then, short sellers have piled into the stock. In the first half of 2023, the stock price rose 1,000% to more than $50 per share, costing short sellers $2 billion in losses.
Short interest on Friday was just above 32% of the stock’s float, leaving the stock vulnerable to strong gains and a short squeeze following positive headlines.
“The squeeze has been real for some time, although it waxes and wanes depending on the stock price,” Ihor Dusaniowski, managing director at S3 Partners, told Yahoo Finance on Friday.
“If the recent stock performance continues, we would expect further short covering to further push CVNA’s stock price higher,” he added.
Following Carvana’s results, analysts Raymond James and William Blair upgraded the stock to Market Perform and Outperform, respectively.
Meanwhile, Jefferies analyst John Colantuoni maintained his underperform rating, acknowledging a “great start” to 2024 but noting the long-term outlook “remains poor.” did. In 2023, Carvana sold his 312,847 units, a decrease of 24% from the previous year.
“Guidance assumes unit sales remain subdued, and it is difficult to assess whether CVNA can sustain recently elevated unit economics after returning to growth,” Colantuoni and his team wrote. “This is a risk, reduces long-term profitability prospects, and makes us cautious about the stock price.” . Analysts have a price target of $30.
Analyst recommendations for the Carvana stock have 2 buys, 16 hold recommendations, and 5 sell recommendations.
Correction: A previous version of this article misstated the name of the S3 partner. We apologize for the error.
Ines is a senior business reporter at Yahoo Finance. Follow her on X @ines_ferre.
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