Key insights
- Carvana reported a 'profit' but significantly increased outstanding shares, effectively diluting shareholder value by over $1 billion. This raises concerns about the company's true profitability and financial health, potentially leading to negative sentiment and downward pressure on the stock. A retail trader has taken a short position based on this analysis.
On the surface Carvana's (CVNA) last earnings report was pretty rosy. Revenue up, earnings up, sales up. Unfortunately, the company actually lost shareholders over $1 billion dollars last quarter.
While CVNA pays no dividend and reports a 'profit,' they also pay their directors and staff via massive share issuance.
Let's dive into the numbers. Last quarter Carvana reported a 'profit' of $250 million dollars. In that same period their outstanding shares rose from 137,634,000 to 142,749,000. An increase of 5.115 million shares. At an average price between $300-400 a share that is $1.53 - $2.04 billion dollars.
Meaning the company actually lost shareholders somewhere in the ball park of $1.28-1.79 billion dollars. Carvana's entire profitability is an illusion, at a time when truly profitable companies are buying back shares and issuing dividends.
Positions and Disclosure: I am a retail trader not a financial advisor. After seeing this earnings report and the very bearish technical chart I opened a put position against Carvana.
BFLO-Retail