Sometimes, commentators assume that Carvana (NYSE:CVNA) stock can only move higher if there’s a massive short squeeze.
Yet, a small-scale investment in Carvana could actually pay off in the long run. Sure, there are risks involved, but don’t dismiss Carvana as the company is getting proactive in developing its operations and solidifying its financials.
Carvana is a fascinating company the revolutionized the used-vehicle market. As we’ll discover, Carvana is still trying out new ideas and expanding into potentially lucrative markets. But first, let’s check under the hood and see how Carvana is addressing its debt burden.
What CVNA Stock Traders Should Be Watching
Instead of sitting around and hoping for a short-squeeze rally, CVNA stock investors need to pay attention to Carvana’s fiscal facts. Granted, the company’s balance sheet isn’t perfect, but Carvana is working to address this issue.
Notably, Carvana’s total debt (roughly $8.37 billion) and net debt (around $7.36 billion) have remained fairly steady during the past year. One risk to be aware of is that Carvana isn’t currently profitable, so prospective shareholders will certainly want to keep tabs on the company’s upcoming quarterly reports.
There are two pieces of good news on the fiscal front, however. First, Carvana reportedly raised $126 million from corporate insiders (known as the “Garcia Parties”) besides $225 million raised from an at-the-market offering.
Also, Carvana is completing a debt exchange with over 96% of the company’s note holders. Carvana expects to reduce its total debt by more than $1.325 billion. The company believes it will extend its debt maturities and lower its near-term cash interest expense by “more than $455 million each year for the next two years.”
Carvana Is Constantly Expanding
A modern-day pioneer, Carvana never ceases to venture further into U.S. markets. You never know where you might see Carvana expanding its operations next, or what the company might be up to.
For instance, Carvana recently launched same-day delivery services in select areas of North Carolina and Indiana. This is a savvy move for Carvana, as today’s customers expect speed and convenience in their transactions.
Meanwhile, the company is making legal waves in Illinois. Reportedly, a Carvana-led coalition helped to get legislation passed that “more formally allows car buyers in the state the convenience of home delivery.”
This clears a potential path to profits for Carvana in Illinois, where the company’s customers can now enjoy the convenience of home vehicle delivery.
Here’s where the rubber really meets the road: Carvana just installed a car vending machine in the city of Hollywood, Florida. This vending machine is “the second of its kind in the Miami area, and the fifth in Florida.”
Will vehicle vending machines become commonplace in America? Again, there are risks involved, since the future is uncertain. However, at least we can say that Carvana isn’t afraid to test out intriguing business concepts.
CVNA Stock: A Small Position May Be Appropriate
Could a short squeeze propel the Carvana share price to new heights? Sure, it’s possible, but there’s more to Carvana than meme-stock fantasies of fast money.
Clearly, Carvana will take risks in hopes of long-term rewards. It’s encouraging to know, though, that Carvana is also taking action to improve its balance sheet. All in all, CVNA stock gets a “B” grade and adventurous investors might consider it for a small share position.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.