The used-car giant had only $434 million cash at the end of 2022 as its debt continued to rise.
After a dream start to the stock-market year, Carvana came back to Earth.
The online used-car seller's stock had rebounded spectacularly this year -- until the report of fourth-quarter and full-year results on Feb. 23. Carvana's share price more than doubled (up 113%) to $10.08 from Dec. 30 when it ended the year at $4.74.
The most disconcerting issue is that nothing justified this improvement. That's because the fundamentals hadn't changed and the Tempe, Ariz., group had made no announcement.
Observers explain that Carvana (CVNA) - Get Free Report, which is struggling under significant debt, had become a meme stock. Meme stocks are defended by retail investors on social media because they are attacked by short-sellers, investors who bet that these stocks' prices will drop.
'It Was Clearly a Very Difficult Year': Carvana
But reality soon caught up with the company.
"2022 was a unique year for Carvana," the firm said on Feb. 23 in the earnings release. "From a short-term perspective, it was clearly a very difficult year. After eight consecutive years of annual improvement, it was the first year we stepped back on the key metrics."
It continued: "This begs a series of questions: What happened in 2022? What are we doing about it? Where are we going in the near term? What does all this mean for the long-term prospects of the business?"
The numbers are awful: In the fourth quarter, sales fell 23% and revenue was down 24.4%. The company lost about $7,400 on each unit it sold, and Carvana's gross profit per vehicle fell to $2,219, less than half what it was in the year-earlier period.
The firm burned $1.8 billion in cash and had just $434 million cash on hand at the end of 2022. Its debt amounts to $7 billion including leases.
Another figure is noteworthy: For last year Carvana posted a net loss of $1.59 billion, more than the $610 million cumulative losses from 2014 to 2021. During this period, the largest annual loss Carvana recorded was $171 million for 2020.
These figures reflect a reversal of the situation for the company, which had surfed on soaring used-vehicle prices caused by both the covid-19 pandemic and the disruptions to the supply chains of car manufacturers.
Carvana had notably bought many cars in hopes of reselling them at much higher prices. But conditions in the car market normalized, and the Federal Reserve sharply raised interest rates, hammering the used-car market.
Financing car loans became expensive, and at the same time, consumers, attracted by competitive prices offered by car manufacturers, preferred to buy new vehicles. Taken together, these left Carvana with large inventories of used vehicles.
No Plans to Raise New Funds
"One, we came into the year positioned for growth, similar to what we had experienced in the prior nine years," Chairman and CEO Ernie Garcia III told analysts during the earnings call on Feb. 23. "Two, after the pandemic snarled the automotive supply chains and historically rapidly rising interest rates combined to dramatically impact the affordability of used cars."
"Three, rising interest rates and market sentiment drove a significant shift in our priorities away from growth and toward profitability. Four, this combined to lead to markedly lower volumes than we had positioned for, and as a result, we've been carrying excess costs."
During this call, Garcia did not utter the word "bankruptcy," even though many experts believe that this is the elephant in the room.
Garcia said the company is doing everything to reduce losses and costs and will also buy fewer cars to match the slowdown in sales. Its model is based on the idea that must sell more used vehicles than it buys.
The car-vending-machine company plans to cut costs by about $100 million a year this year.
The boss ruled out a capital raise for now, explaining that Carvana had "a lot of options," such as selling its real estate assets.
"Our plan is to not need to raise additional capital," Garcia said. "But obviously, we'll be paying attention. We'll do what we need to do that's right for the business. I think we have access to capital in many forms. We've obviously got a lot of real estate that's very high quality. We have approximately $2 billion of real estate."
"The majority of that is inspection centers, which are high-quality financeable properties. We've got a lot of other assets as well, and we've got capacity to put in more secured debt. We've got capacity to put in more unsecured debt. Obviously, in the future, we chose to -- and we believe it was the right choice, we could raise equity."
In addition to the $434 million in cash, the firm also has approximately $1.5 billion in committed facilities. But the horizon doesn't seem to clear up.
"We are planning more conservatively in the near term than we have in past years and, therefore, expect the positive seasonality we usually see late in the first quarter and in the second quarter to be more muted this year than in prior years," Carvana warned.bankruptcy pandemic covid-19 stocks federal reserve real estate interest rates
Bitcoin price must break $31K to avoid 2023 ‘bearish fractal’
BTC price needs to recoup some more key levels before ditching longer-term bearish risk, the latest Bitcoin analysis says.
BTC price needs to recoup some more key levels before ditching longer-term bearish risk, the latest Bitcoin analysis says.
Bitcoin (BTC) held above $30,000 at the Oct. 23 Wall Street open as analysis said BTC price strength could cancel its “bearish fractal.”
BTC price preserves majority of early upside
The largest cryptocurrency made snap gains after the Oct. 22 weekly close, stopping just shy of $31,000 in what became its highest levels since July.
Now, popular trader and analyst Rekt Capital is keen to see the $31,000 level break.
“Bitcoin has Weekly Closed above the Lower High resistance to confirm the breakout,” he commented alongside the weekly chart.
Rekt Capital argued that BTC/USD could disregard the bearish chart fractal in play throughout 2023 next. This had involved the two year-to-date highs near $32,000 forming a doubletop formation, with downside due as a result.
Specifically, Bitcoin requires a “breach” of $31,000 in order to do so.
#BTC— Rekt Capital (@rektcapital) October 23, 2023
Is Bitcoin on the cusp of invalidating the Bearish Fractal?
Here are the Bearish Fractal Invalidation Criteria:
a) Bull Market Support Band holds as support ✅
b) Weekly Close beyond Lower High resistance ✅
c) Breach of $31k yearly highs ❌$BTC #Crypto #Bitcoin https://t.co/4H3OMiDzFB pic.twitter.com/mjoO8OF1Qs
More encouraging cues came from the True Market Deviation indicator from on-chain analytics firm Glassnode.
As noted by its lead analyst, Checkmate, on Oct. 23, the metric, also known as the Average Active Investor (AVIV) profit ratio, has crossed a key level.
Bitcoin’s True Mean Market price (TMM) — the level that BTC/USD spends exactly 50% above or below — is now below its spot price, at $29,780.
“Have we now paid our bear market dues?” Checkmate queried, describing TMM as Bitcoin’s “most accurate cost basis model.”
Institutions awaken in “Uptober"
Analyzing the potential drivers of the rally, meanwhile, James Van Straten, research and data analyst at crypto insights firm CryptoSlate, flagged the potential approval of the United States’ first Bitcoin spot-price-based exchange-traded fund (ETF).
While not yet awarded the green light, a U.S. spot ETF is being treated as an inevitability after legal battles resulted in regulators losing sway.
“The potential approval of a spot ETF for Bitcoin has spurred a significant increase in bullish inflows in the crypto market,” Van Straten wrote in an update published on Oct. 23.
He noted that Glassnode data shows inflows via over-the-counter (OTC) trading desks spiking since late September.
“In addition, the Purpose Bitcoin ETF, with its holdings of approximately 25,000 Bitcoin, has observed consistent inflow throughout the past month. Even though these inflows might not be termed as ‘large,’ they denote a positive market sentiment,” he continued.
“This uptick in inflows across various platforms indicates an optimistic market response to the potential approval of a Bitcoin ETF, bolstering the overall landscape of digital assets.”
The largest Bitcoin institutional investment vehicle, the Grayscale Bitcoin Trust (GBTC), continues to see a lower discount to the Bitcoin spot price, having already seen its smallest negative margin since December 2021.
This stood at -13.12% as of Oct. 23, per data from monitoring resource CoinGlass.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.cryptocurrency bitcoin crypto btc etf crypto
California bill aims to cap crypto ATM withdrawals at $1K per day to combat scams
A new legislative investigation found some crypto ATMs charging a premium as high as 33%, while a few ATMs had limits of up to $50,000.
An airline just launched one of the country’s longest domestic flights
The trip from New York’s JFK to Anchorage International Airport will take over seven hours.
While the title for longest commercial flight in the world will soon be taken over by the 20-hour and 10,576-mile journey between Sydney and London that Australia's Qantas Airways (QUBSF) - Get Free Report is preparing to launch in 2025, the U.S. is a big country with a number of long-haul domestic flights on its own.
Without even looking at U.S. territories overseas such as Guam or American Samoa, one can spend more than 10 hours in the air and end up only in another state. Some of the longest domestic flights in the U.S. include routes from Boston to Honolulu in Hawaii and Chicago to Alaska's Anchorage.
In a move to bring more service from mainland U.S. to Alaska, Alaska Airlines (ALK) - Get Free Report is about to launch its longest flight yet that is subsequently also one of the longest in the country — the route from New York's JFK to Anchorage International Airport will take over seven hours and cross 3,386 miles.
New flight takes travelers to 'land of midnight sun'
The route will debut on June 13, 2024 and take place daily on a Boeing 737-8 (BA) - Get Free Report. The airline recently invested in the plane with the longest capacity in its fleet to be able to serve faraway destinations on the East Coast.
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"We're eager to welcome guests to our great state from the city that never sleeps to the land of the midnight sun on Alaska's new nonstop flight," Jillian Simpson, president and CEO of the Alaska Travel Industry Association, said in a statement. "There's so much to do in Anchorage and in the smaller towns nearby, mapping out your itinerary might be the toughest thing you do before heading west."
The route is part of Alaska Airlines' wider efforts to expand its coverage between Alaska and the mainland U.S. On May 18, it will also launch a nonstop route between Anchorage and San Diego that will take just over six hours and span nearly 2,500 miles. While the airline serves many Californian cities, San Diego's smaller size meant that residents would have previously needed to transfer in Seattle or LA on their way to Alaska.
New routes meant to serve both burgeoning tourist interest and local demand
After adding the new flights, Alaska Airlines expects to have 63 flights a day leaving from Anchorage during the summer of 2024. This is designed to meet the burgeoning traveler interest in the state as well as serve Alaskans who are separated from large American cities by geography.
"Alaskans like to get out," the airline said in announcing the new routes. "Sometimes that might mean hitting all the must-sees in New York City or taking surf lessons in SoCal. We'll make it more convenient for our guests to get there from Anchorage, as well as lots of other places."
For those who are able to make travel plans this far in advance, both the New York and San Diego flights to Anchorage are already available for booking on Alaska Airlines' website. The former starts at $400 each way for mid-week departures, while flying into the state from San Diego will cost from $300.stocks