3 Carvana Analysts Tackle Online Auto Retailer's Q2 Earnings, Debt Restructuring, EBITDA

Carvana Co (NYSE:CVNA) shares skyrocketed nearly 50% this week after the company issued its second-quarter earnings report, despite reporting a decline in sales.

Investors and analysts are responding positively to better-than-expected metrics, debt restructuring and the prospect of positive adjusted EBITDA for the second consecutive quarter in the third quarter.

Carvana’s Q2 By The Numbers: Carvana reported a loss of 55 cents per share, better than the anticipated $1.15 loss, on revenues of $2.97 billion, which beat the $2.59-billion Street estimate. Notably, adjusted gross profit for the quarter rose 24.2% to $538 million, with adjusted EBITDA for the quarter being $155 million compared to a loss of $216 million last year.

Here’s what the Street has to say.

The Wedbush Analyst: Seth Basham said that while Carvana’s results beat expectations in terms of adjusted GPU and EBITDA, the company still needs to make more substantial improvements in unit economics for long-term business viability.

The debt restructuring provides some breathing room, but it also raises future debt levels and cash interest burden, the analyst said.

Wedbush maintained an Underperform rating and raised the price target from $1 to $40.

The Oppenheimer Analyst: Brian Nagel acknowledged Carvana’s efforts to cut costs and restructure its balance sheet, but said concerns persist around the company’s heavily leveraged balance sheet and the sustainability of severe cost-cutting measures.

While restructuring provides some financial flexibility, it could lead to greater indebtedness over time, the analyst said.

Oppenheimer has a Perform rating on Carvana.

The RBC Analyst: Brad Erickson downgraded Carvana from Sector Perform to Underperform and said that while liquidity risks are reduced, significant dilution and an expanding debt load post-restructuring are likely.

The company’s benefits from transitory tailwinds to GPU are likely unsustainable in RBC’s view. Erickson said that a return to retail unit growth could stall or even reverse the progress made to operating leverage.

RBC raised its price target from $9 to $30 based on a more balanced long-term view of revenue growth and margin expansion.

CVNA Price action: Shares of Carvana are trading 11.65% lower to $49.40 late Thursday morning, according to data from Benzinga Pro.

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