Shares of Carvana Co ( NYSE: CVNA ) tanked more than 20% this morning after the used car retailer reported disappointing results for its fiscal fourth quarter.
Should you buy Carvana stock?
Last night, the Tempe-headquartered firm also committed to trimming its costs by a whopping $1.0 billion over the next months. Still, Joule Financial’s Quint Tatro said on CNBC’s “ The Exchange ”:
They have a tremendous debt on the balance sheet. I just can’t, in good conscience, be a buyer of this name whether it’s a short squeeze trade or not. It’s not for me.
The automotive retailer lowered its headcount by nearly 20% last year. That affected about 4,000 workers in total.
Year-to-date, Carvana stock is still up about 70% at writing. But the rally has been related only to a short squeeze and does not reflect the company’s financial health by any stretch.
Carvana Q4 earnings snapshot
- Lost $806 million versus the year-ago $89 million
- Per-share loss also climbed from $1.02 only to $7.61
- Total revenue tanked 24% YoY to $2.83 billion
- Consensus was $2.18 of loss on $3.06 billion revenue
- Retail sales slid 23% year-on-year to 86,977 units
Carvana’s expectations for 2023
Nonetheless, Carvana expects gross profits per unit to surpass $4,000 again this year, as per the earnings press release .
It forecasts significant positive adjusted earnings as well but muted volumes as it continues to focus on profitability and not on growth. In a letter to shareholders , Carvana said:
While last year was difficult for us, it was also difficult for many others in automotive industry. As a result, our competitive differentiation has grown further. We remain on path to becoming the largest and most profitable automotive retailer.
Wall Street currently has a consensus “hold” rating on Carvana stock.
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