Carvana says it expects adjusted profit of more than $50M in Q2; shares surge 56%

Debt-heavy Carvana Co. said Thursday it expects to achieve an adjusted profit above $50 million in its second quarter, an announcement that sent its share price soaring.

The online used-vehicle retailer — which has in the last several months scaled back its growth endeavors, trimmed inventory and worked to reduce its cash burn to focus on improving profitability in a more volatile sales environment — also said it expects to take in adjusted total gross profit per vehicle of more than $6,000 in the second quarter.

Carvana shares surged 56 percent to $24.27 at the Thursday market close. A year earlier, the stock traded at about $25 a share after peaking above $360 in 2021.

Share prices of online used-vehicle retailers Vroom Inc. and Shift Technologies Inc. also rose following Carvana's announcement. Vroom shares closed Thursday at $1.15, up 21 percent; and Shift Technologies shares closed at $1.90, up 11 percent.

Carvana's estimated adjusted earnings before interest, taxes, depreciation and amortization of more than $50 million in the second quarter would be a swing from the adjusted EBITDA loss of $239 million it reported in the same period a year earlier. The company recorded a net loss of $439 million in the second quarter of 2022 and a net loss of $2.89 billion for the full year.

The company continues to face pressure to restructure its looming debt load. Creditors holding the vast majority of Carvana's bonds had this year pitched the company on ways to pare down debt and improve liquidity, including a proposal for a debt-for-equity swap.

Carvana pitched its own debt exchange offer in March and extended the deadline for that multiple times. The company did not get holders of at least $500 million of its notes to participate before the deal expired June 1.

Following the expiration of that offer, S&P Global Ratings upgraded Carvana from a CC issuer credit rating to CCC but said its outlook remains negative. Its current view is that Carvana's liquidity "will continue to erode over the next 12 months with the potential for another attempt at a distressed exchange or other type of capital restructuring."