Carvana Co. (NYSE:CVNA) announced that it expects to report a profit in the second quarter, sending its shares soaring on Friday morning.
The online used-car retailer cited a “strong start to the year” and said adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) would be positive this quarter.
In the first quarter, the company reported a loss per share of $1.51, beating the average analyst estimate of a $1.96 deficit.
The positive results come after a turbulent 2022 for Carvana, which has been weighed down by the volatile used-car market, rising interest rates, and arduous debt.
Carvana CEO Ernest Garcia said the company reduced vehicle inventory, lowered advertising expenses, and cut overhead by $160 million to achieve this milestone.
"The first quarter was a big step in the right direction and there are more steps to come,” Garcia said in a statement.
“Given our strong start to the year, we expect to achieve positive adjusted EBITDA in 2Q2 2023. It is clear our strategy and execution are working as evidenced by our 61% increase in gross profit per unit, the best first quarter gross profit per unit (GPU) in company history.”
If Carvana’s results are any indication, the used-car market, a closely watched barometer of consumer spending, may be stabilizing after prices declined for much of last year.
Carvana’s rival, CarMax., last month reported better-than-expected profit in its fiscal fourth quarter.
Nevertheless, Carvana still faces considerable debt, and creditors holding about 90% of its bonds recently proposed a debt-for-equity swap after rejecting the company’s proposed debt exchange, Bloomberg reported.
Shares of Carvana jumped 42.4% on Friday morning to reach $10.12.
Contact Angela at angela@proactiveinvestors.com
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