Carvana Q3 Earnings Preview: Debt Restructure Drives Stock Higher, Speed Bump Ahead?

Carvana Co CVNA will report third-quarter earnings on Nov. 2. The Street is expecting the used-car retailer to report a negative 80 cents in EPS and $2.78 billion in revenues. Let’s look at how the company is doing, what analysts would be focusing on, and where estimates lie.

The report could also impact peer company stocks such as Cars.com Inc CARS, AutoNation Inc AN, CarGurus Inc CARG, Vroom Inc VRM, CarMax Inc KMX and TrueCar Inc TRUE.

Business & Financials: Carvana stock has been on a rollercoaster, hitting peak pricing once in July and then in September. Carvana’s stock price boosted after it released its second-quarter earnings, as it successfully closed a debt restructuring agreement, which reduced the used car retailer’s total debt by more than $1.2 billion. A rating upgrade from S&P Global followed.

Related: Carvana Might Be Beginning To Find Its Wings

Q3 Analysts’ Focus: Analysts who are able to read between the lines conferred that the debt restructuring deal actually struck warning bells for the company. Behind the immediately visible positive cash flow impact lay higher interest rates on all of its debt. Thus analysts would be eager to understand the impact of the debt restructuring on Carvana’s debt at its Q3 earnings call.

Ratings & Estimates: Carvana’s stock is Hold per consensus compiled from 23 analysts that rated the stock in the last 90 days. Consensus price targets stands at $28.68. Exane BNP Paribas analyst recently downgraded the stock from Outperform to Neutral while Wedbush and Evercore ISI Group anlaysts raised their price target on the stock from $40 each to $48 and $42, respectively.

Price Action: Caravan’s stock is up 70% over the past year and has recorded a 52-week high of of $57.19 during such period. It has, however, corrected, by 35% over the past month. The stock was trading at $25.99 at Nov 1. close. The stock has a very high short interest of 44%, which makes it susceptible to a short squeeze.

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