What happened
Shares of Carvana (CVNA 8.79%) climbed 21.9% this week, according to data provided by S&P Global Market Intelligence, largely driven by a favorable debt deal and the online used car dealer's better-than-expected second-quarter results.
So what
Shares initially popped more than 40% on Wednesday following the report. Carvana confirmed its Q2 2023 revenue fell a less-than-expected 23.6% year over year to $2.968 billion, while over $1.1 billion in annualized cost reductions helped trim its net losses to $105 million, or $0.55 per share, from a loss of $2.35 per share in the same year-ago period.
Both metrics crushed expectations for a 33% sales decline and a steeper loss of $1.15 per share. In tandem with its quarterly report, Carvana also announced a favorable agreement with debtholders that significantly reduces its outstanding debt by over $1.2 billion and should save it over $430 million over the next two years in required cash interest expenses alone.
That's not to say Carvana's ride this week was a straight line upward; the stock gave up about half its post-earnings gain on Thursday as investors took profits and analysts at RBC lowered their ratings on Carvana shares.
Now what
Carvana's business today has come a long way from the one plagued by bankruptcy concerns late last year, leading the stock to rally 900% year to date in response. It's not terribly surprising, then, to see investors and analysts alike tempering their enthusiasm following this incredible rebound. But as long as Carvana continues to take steps to return to growth and, eventually, to sustained profitability, its stock should continue to respond in kind.
