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.
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.
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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