What investors should know about Carvana's Q1 forecast
Carvana (CVNA) posted its first ever annual profit and issued a strong first-quarter forecast. Shares of the company are moving higher on Friday in response to the report.
Yahoo Finance Reporter Pras Subramanian joins the Live show to discuss the report and give key insights into what investors should know when considering Carvana for their portfolios.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
SEANA SMITH: I will. Carvana shares are surging this morning on the company's latest report here that we are seeing. You're looking at a jump of just about 36%. Clearly, there is a lot of optimism playing out on the street price. Given the fact that Carvana is much better positioned or at least the belief right now than it was compared to a year ago.
You have revenue though, on the other hand, did miss the Street's expectations. What is this report really tell us about the positioning and the future of the company?
PRAS SUBRAMANIAN: I thought to myself, Carvana really pulled a rabbit out of the hat here. I mean, this company was-- I hate to say it was almost left for dead for a while. In fact, some of its competitors like vroom did not survive and I guess they were able to they beat on Q4 earnings the adjusted EBITDA. They were able to improve their profit per car almost like double compared to last year.
So they're cutting costs there, they're able to refinance a lot of debt and push that out and they say that they'll have a better quarter even Q1 is looking good for them too. And the market is normalizing. Used car prices are coming down, they're able to buy more cheaper cheaply and then turn them around and sell them to consumers.
But I think Wall Street also is still a bit more fearful about the debt load that they have, it's a huge debt load and it's like how much can you keep refinancing, diluting your stock and keep pushing that out. I think that's the question now but today the stock is up a lot.
BRAD SMITH: Should investors be concerned at all though when you've got and you hear about companies like Hertz, some of the car rental companies that are saying, hey, we're going to get rid of some of our fleet and that is now used cars that are entering into the market. So that supply being added in as another option for consumers to consider.
PRAS SUBRAMANIAN: I mean, your overall supply coming going up so prices may come down. But I would argue Carvana probably buys a lot of these cars from Hertz. That's a big channel for them to bring in new cars to sell to their customers. So it's a give and take there. It's a dynamic changing market. There's still a demand for cheap cars, people still need cars to get around. And I think that Carvana is now able to capitalize on that market trend.
BRAD SMITH: Well, if anybody is looking for anything else to get around. I've got some top tips here in New York at least. It's a trek. Pras, thanks so much for taking the time here on the day
