- Carvana, Used Car Dealer, Reaches Deal to Restructure Debt The New York Times
- Carvana shares jump more than 30% on deal to reduce debt by $1.2 billion CNBC
- Carvana Climbs After Retailer Reaches Debt Restructuring Deal (CVNA) Bloomberg
- Carvana enters deal with noteholders to cut debt by $1.2 billion Yahoo Finance
- Carvana Announces Agreement With Noteholders That Will Provide The Company Significant Flexibility as It Continues to Execute Its Profitability and Growth Plan by Reducing Total Debt, Extending Maturities and Lowering Near-Term Cash Interest Expense Business Wire
- View Full Coverage on Google News
Tag Archives: Carvana
Carvana, MongoDB, TripAdvisor, Toll Brothers and more
A mascot of TripAdvisor is seen at its display at a trade fair.
Axel Schmidt | Reuters
Check out the companies making headlines in midday trading.
Carvana — Shares of the online car dealership fell more than 32% after Carvana’s largest creditors signed an agreement to negotiate together with the company. Bankruptcy concerns around Carvana have grown since the company reported disappointing third-quarter results last month. The pact between the creditors was first reported by Bloomberg.
MongoDB — The database platform surged almost 22% following the company’s quarterly results. Mongo posted better-than-expected revenue for the most recent quarter and issued upbeat fourth-quarter revenue guidance, according to Refinitiv.
State Street — Shares of the asset manager jumped more than 8% after the company announced a new buyback plan. The company said it now intends to buy back up to of $1.5 billion of its common stock in the fourth quarter of 2022, $500 million more than the amount announced previously.
Online travel — Online travel stocks dropped after Wolfe Research downgraded the sector to market underweight from market weight, citing trouble ahead on the likelihood of a recession. The firm named a worse outlook for names such as Booking Holdings, Airbnb, TripAdvisor and Expedia. Shares of TripAdvisor and Expedia were down more than 6%. Booking Holdings fell more than 4%, and Airbnb shed 3%.
Stitch Fix — Shares gained 3%, bouncing back from an earlier dip during pre-market trading. On Tuesday, the company posted quarterly results that fell short of analysts’ expectations, according to FactSet. Stitch Fix also trimmed its full-year forecast.
Toll Brothers — Shares of the luxury homebuilder rose 7% after the company reported quarterly results. Toll Brothers posted home sales revenue that was better than Wall Street expectations, according to Refinitiv.
Dave & Buster’s Entertainment — Dave and Buster’s stock shed more than 4% despite the company posting solid quarterly revenue on Tuesday. The entertainment company also provided an update on the fourth quarter, noting that through the first five weeks of the period, pro forma combined walk-in comparable store sales declined 2.4% versus the comparable period in 2021. However, those sales have increased 15.7% over the same period in 2019.
SolarEdge Technologies — The solar stock gained 3.6% after Bank of America upgraded it to a buy from neutral. The firm said the stock could gain more than 20% as its outlook improved.
Campbell Soup — Shares rose more than 5% after Campbell Soup topped forecasts on the top and bottom lines in its latest earnings report. The food producer cited “inflation-driven pricing, brand strength and continued supply recovery” for its recent results.
Chinese tech stocks — Shares of U.S. listed China stocks declined even as Beijing announced it will lift some Covid restrictions. JD.com and Baidu were each lower by more than 2%.
Airlines — Airline stocks fell as a group during midday trading. Shares of Southwest Airlines declined nearly 4%, while American Airlines slid 4.3%. Shares of Delta Air Lines, Alaska Air Group and United Airlines each slipped more than 3%.
Lowe’s Companies — Shares added more than 3% after Lowe’s affirmed its full-year guidance, and announced a new $15 billion share repurchase program. The home improvement retailer is hosting its annual analyst and investor conference on Wednesday.
— CNBC’s Alex Harring, Yun Li, Tanaya Macheel, Jesse Pound and Samantha Subin contributed reporting
Carvana Faces Cash Crunch From High Debt, Rising Interest Rates
Carvana Co.
CVNA -3.13%
, the used-car dealer that was a pandemic winner, is rushing to conserve cash as once-plentiful financing options dry up and business deteriorates.
On Friday, Carvana laid off about 1,500 people, its second round in six months. Its weakening finances mean raising funds would be difficult and costly, and it could run out of cash in a year, analysts say.
Few companies have been hit harder by rising interest rates than Carvana. The company’s interest expense nearly doubled early this year when it paid up to get financing for an acquisition. Its cost to finance car purchases is up by three-quarters this year, and some of its real estate has lost value. Car buyers, meanwhile, are holding off purchases in the hope that rates fall.
In a memo to Carvana’s employees announcing the layoffs, Chief Executive
Ernie Garcia III
blamed an uncertain economic environment that he said was particularly tough on fast-growing companies that sell products affected by higher interest rates. “We failed to accurately predict how this would all play out and the impact it would have on our business,” he said.
The company said it has millions of satisfied customers, and that disrupting the auto industry isn’t easy. “We have seen many e-commerce companies written off early in their journey only to become market leaders. We plan to follow suit,” a spokesman said. Earlier this month, Carvana executives said cash flows and profitability are the strategic focus now.
Carvana became wildly popular among car buyers, with heavy advertising and haggle-free cars delivered to their doors. Investors bought in, driving the shares up more than sixfold. The stock has fallen more than 97% from its peak last year. Carvana’s bonds are trading at distressed levels.
“They built an infrastructure across the enterprise with the assumption that the growth would be there,” said Daniel Imbro, a managing director at Stephens Inc.
The ratings firm S&P Global Ratings warned that Carvana’s liquidity likely would erode faster than expected, and changed the outlook on its CCC+ rating to negative earlier this month. It said the company’s standing to raise more cash from stock and bond investors has deteriorated.
Less than a year ago, Carvana was still trying to keep up with demand. In February, it agreed to buy a car-auction business that would help boost inventory. Car sales slowed, though.
The day the deal was completed in May, Mr. Garcia said it had overshot on growth and laid off 2,500 workers. Days earlier, it had issued a $3.275 billion bond with a 10.25% coupon to fund the purchase. The high coupon almost doubled Carvana’s annual interest expense and reflected investors’ fears of a recession and rising inflation.
Carvana CEO Ernie Garcia III and his father, Ernest Garcia II, when the company went public in 2017.
Photo:
Michael Nagle/Bloomberg News
Carvana thrived when interest rates were low because it could borrow cheaply to buy cars and make loans to customers. Its credit line from
Ally Financial
to buy cars had an average 2.6% interest rate last year, compared with 4.5% at the end of September. Ally required Carvana to set aside 12.5% of the amount borrowed as of late September, up from 7.5%, further tightening its cash situation. An Ally spokesman declined to comment.
Carvana earned big profits selling its car loans to investors who were hungry for yield. Gains from the loans help Carvana offset the losses it makes selling cars. When investors turned choosier on these securities in the spring, Carvana sold many of the loans to Ally instead, on less-favorable terms. The gains it books from loan sales fell by around one-third in the third quarter from the year-earlier period.
Mr. Garcia told analysts on a call Nov. 3 that the company would keep cutting costs and that it has access to around $4 billion in liquidity, in addition to its $316 million cash and some other assets. The amount includes what it can borrow on credit lines to buy cars and make loans. It also included around $2 billion of real estate, which isn’t typically considered a liquid asset.
The company’s chief financial officer said Carvana could borrow against the real estate, which includes sites it bought this year. It previously raised around $500 million from selling some sites where it inspects cars and then leasing them back for 20 or 25 years.
That step might work, analysts said, but would also add expenses. They said any real-estate deals would likely occur piecemeal over time, or involve high rent payments because of Carvana’s credit troubles.
Scott Merkle, a managing partner at SLB Capital Advisors, which specializes in sale-leaseback transactions, said the long-term leases in the space generally rely on financially sound tenants that can be expected to make their lease payments for years. He said that overall conditions for sellers have softened in that market because of higher interest rates, but that sale-leasebacks still provide a better cost of capital for companies than other financing.
Carvana said it is testing ways to make more from its car sales, such as having customers pick up cars from its vending machines.
Photo:
USA TODAY NETWORK/Reuters
Some Carvana-leased properties have received a tepid response on the market. A 12-story “flagship” car-vending machine in Atlanta that Carvana sold and leased back in December was relisted this summer. It is still on the market, and the asking price has since been lowered.
Carvana said it is testing ways to make more from its car sales, such as taking payment before delivery and having customers pick up cars from its vending machines.
“We’ve got a bunch of committed liquidity. We’ve got a bunch of real estate, and I think that we feel like that puts us in a good position to ride out this storm,” Mr. Garcia told analysts on the Nov. 3 call.
—Ben Foldy, Will Feuer and Ben Eisen contributed to this article.
Write to Margot Patrick at margot.patrick@wsj.com and Kristin Broughton at Kristin.Broughton@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Collapse of Carvana, the ‘Amazon of Used Cars’, Continues
The sky is not clearing up for Carvana.
On the contrary, big clouds continue to gather over the company which was one of the big winners of the covid-19 pandemic, with a massive growth.
Since announcing its quarterly results on Nov. 3, Carvana (CVNA) – Get Free Report shares have lost 44% of their value and are currently trading at $8.06 versus $14.35 on that day. This translates into a decline in market capitalization of approximately $1.1 billion in two weeks. Carvana currently has a market value of $1.43 billion.
The company, founded in 2012 and based in Arizona, took advantage of favorable conditions to market its new way of buying a car. The group’s car vending machines stuck well with the pandemic, a period during which consumers wanted to avoid contact as much as possible, to limit their exposure to the virus.
The federal government had also flooded consumers with money via stimulus programs. Interest rates were almost zero, which meant that financing the purchase of a vehicle cost practically nothing.
Added to this, the supply chains of car manufacturers were disrupted, which made the production of new vehicles difficult. Faced with these challenges, consumers turned to the second-hand market as the waiting times for new vehicles were long. Used car prices therefore jumped, making it a good deal for Carvana.
Basically, all the winds were blowing in the right direction for the company.
New Car or Used Car?
But coming out of the pandemic, Carvana’s fortunes seem to have turned completely. The used car market remains hot. But all the other factors have reversed. There is no more stimulus money. The central bank is aggressively raising interest rates and inflation is at its highest in 40 years. The economy is also close to a recession more than ever, and the waves of job cuts follow one another. Used car prices remain high but financing the transaction has become very expensive for consumers. Supply chains have improved significantly, facilitating the production of new vehicles.
This was felt in the latest quarterly results from Carvana: In the third quarter, Carvana’s revenue fell 2.7% year-on-year to $3.4 billion, while net loss jumped to $283 million from just $32 million in the third quarter of 2021, the company said in a letter to shareholders.
Used car sales in the U.S. fell almost 13% year-on-year, in the third quarter of 2022.
“If you’re looking at newer used cars — models in the 1 to 3-year-old range, you may find that prices are still relatively close to what they sold for new,” Consumer Reports said. “If you have to borrow money to buy the car, it may be better to find a new car that can qualify you for a lower interest rate, to say nothing of the benefit of a fresh factory warranty. Many manufacturers subsidize financing and may offer interest rates that are much lower than normal to qualified buyers.”
All this complicates the affairs of Carvana, which had to go into $3.3 billion of debt to finance the acquisition of auctioneer Adesa’s physical auction business this year.
Elimination of 1,500 Additional Jobs
The group is therefore under enormous financial pressure.
“Significant nearer-term operational and financial risks for Carvana have emerged and are likely to cloud the CVNA investment story for the foreseeable future,” Oppenheimer analyst Brian Nagel said in a note on Nov. 15, downgrading the stock.
He added that “we do not envision investors bidding CVNA meaningfully higher until prospects for a manageable and sustained capital base become clearer.”
Nagel seems to confirm that Carvana has a liquidity problem which the group must address fairly quickly if it wants to stop the collapse. The company has between $6 billion and $7 billion in debt net of the cash on the balance sheet, according to FactSet.
But Carvana is not profitable: its adjusted EBITDA margin loss increased by 6.2% in the third quarter. EBITDA refers to earnings before interest, taxes, depreciation and amortization, which helps investors to gauge the financial health of a company.
The company is struggling to try to change things and delay as much as possible raising equity capital or adding more debt. Carvana, for example, is determined to drastically reduce costs. After cutting 2,500 jobs in May, the company has just announced an additional wave of layoffs which affects 8% of its workforce, or 1,500 employees.
“It is fair to ask why this is happening again, and yet I am not sure I can answer it as clearly as you deserve,” Chief Executive Officer Ernie Garcia told employees in an email on Nov. 18. “I think there are at least a couple of factors. The first is that the economic environment continues to face strong headwinds and the near future is uncertain. This is especially true for fast-growing companies and for businesses that sell expensive, often financed products where the purchase decision can be easily delayed like cars.”
In addition, “we failed to accurately predict how this would all play out and the impact it would have on our business. As a result, we find ourselves here.”
The new cuts will affect “many corporate and technology teams as well as some operations teams where we are eliminating roles, locations or shifts to match our size with the current environment,” Garcia wrote.
Reached by TheStreet, Carvana didn’t comment.
Legal Issues
The new job cuts come after ratings agency S&P Global Ratings warned it was likely to downgrade Carvana in the near term, changing the outlook from stable to negative.
“GPU [gross profit per unit] is expected to remain weak due to higher used car depreciation rates and lower returns from selling loans and other products,” said the rating agency. “Carvana generates over 50% of its GPU from selling loans and other products. With rising interest rates, it is more difficult for Carvana to compete with the large banks that can keep loan rates low, which will reduce the number of loans allocated to Carvana.”
Garcia ruled out the option of raising capital on Nov. 3.
“Our goals are going to be on driving down expenses and trying to get positive EBITDA as quickly as we can,” he told analysts. “We’ve got a bunch of committed liquidity. We’ve got a bunch of real estate. And I think that we feel like that puts us in a good position to ride out this storm. And we’re making great moves inside the company.”
But apart from these financial difficulties, Carvana also faces legal challenges. The company is facing lawsuits from customers in multiple states involving alleged issues over titles and registration and over purchasing vehicles.
Michigan Secretary of State Jocelyn Benson also suspended the retailer’s license, with Carvana suing in return.
Carvana has said the lawsuits are without merit and called the decision in Michigan “arbitrary.”
Imploded Stocks of the Day: Carvana, Twilio, Atlassian, Cloudflare
The free-money virus turned investors’ brains to mush. But the healing has started, interest rates are recovering, QT is here, and look what we got.
By Wolf Richter for WOLF STREET.
Let’s just walk through some of the already Imploded Stocks that further imploded on Friday. There were quite a few of them, as is now usually the case during earnings season, but we’ll just look at a handful. They imploded even as markets rallied for the day. On Friday, the Nasdaq rose 1.3%, reducing its loss for the week to just 5.6%, that kind of week. But a whole bunch of stuff plunged after reporting “earnings” – I’m using that term loosely because they all reported huge losses on top of endless losses.
Carvana, an online used-vehicle retailer, is one of the earliest entries into my pantheon of Imploded Stocks. Thursday evening, it reported “earnings” – you know what I mean. Everything went the wrong way: The number of vehicles it sold to retail customers fell, revenues fell, cost of sales jumped, gross profit plunged, selling and administrative expenses soared, interest expense more than tripled, and the net loss exploded to $508 million.
The used-car startups Carvana, Vroom, and Shift “face an existential crisis,” I wrote in April 2022, based on the changing dynamics in the used vehicle market, the fading willingness of investors to keep fueling cash-burn machines, and driven by the used-vehicle startups themselves that were never designed to make money and never could figure out how to make money, not even in the hottest used-vehicle market ever in 2021.
They were designed to burn investor cash. And investors no longer want their cash to be burned. And so that existential crisis is now.
Back when I issued the existential crisis warning in April 2022, Carvana [CVNA] had plunged by 73% from the high to $100 a share. Since then, they’ve plunged further with relentless brutality. On Friday, Carvana kathoomphed 39%, to $8.76, down 98% from the peak in August 2021, and down 41% from its IPO price in April 2017. Buy and hold, folks.
The chart displays the now classic pattern of how the Fed’s trillions of dollars in QE and interest rate repression – the free-money era started in 2009 – mutated over the years into a virus that turned investors’ brains into mush, and after their brains had turned into mush, they inflated asset prices to ridiculous levels.
But the healing from the free-money virus has started. Interest rates are reverting to some kind of normal, QT is now working, and look what we got. Nearly all charts of my Imploded Stocks look similar (data via YCharts):
In a market where investors’ brains function properly, Carvana’s inability to make money selling used vehicles should have doomed the stock to the penny-stock realm years ago.
Armies of falling-knife catchers that thought they could make money after the shares had plunged by 73% in April 2022 have gotten their beloved fingers sliced off with another 91% plunge. Shares have collapsed so far that you can barely see the 38% plunge on Friday, that little dip at the end of the collapse.
Twilio [TWLO], a cloud communications platform, reported “earnings” Friday morning. Part of the problem was that revenues grew by 32% to $983 million while the net loss exploded by 115% $482 million. The company also issued disappointing revenue guidance.
How can a company that has been publicly traded for seven years, and has been around for 14 years, and had $3.5 billion in revenues over the past 12 months still generate a $482 million loss on $983 million in revenues? That was a rhetorical question.
Every year, the company has generated larger and larger net losses, reaching nearly $1 billion in 2021, and heading for well over $1 billion this year, following the free-money-virus-infected Silicon Valley model: the more they sell, the more they lose.
People that run companies in this way have no idea what it’s like to run a profitable company. It’s not even on their horizon, and it wasn’t on the horizon of their investors. But it’s starting to be.
Shares collapsed by 34.6% on Friday, and are down 91% from their high in that infamous February 2021, when this stuff started to come unglued. Note the now classic Imploded Stocks bubble and collapse pattern. It’s just a simple fact: Free money turns investors’ brains to mush (data via YCharts).
Atlassian Corp [TEAM], a collaboration and productivity software company in Australia that is traded on the Nasdaq, is another one of those shining free-money examples that never figured out how to make money, never even tried, and is just losing huge amounts of money year-after-year: over the past four years alone, it lost $2.3 billion combined, even as its revenues surged.
In other words, it is just buying its revenues. And for a while, that’s all that mattered to investors whose brains had been turned to mush by the free-money virus.
But when it reported earnings on Friday, the company talked about feeling the impact of the global economy – the hiring slowdown at its existing customers resulting in slower demand for collaboration software – and it said the rate at which users of its free versions converted to paid versions was cooling. It said that it would slow down its own headcount growth going forward, and it gave a disappointing outlook.
Shares kathoomphed 29% on Friday to $124.01 and are down 74% from peak mania in October last year. This chart looks awfully close to Carvana’s chart did back in April when it had plunged to $100. Each implosion had a different start date, and each plunge brought out the dip buyers that then got their fingers sliced off, and it will happen again because there are still dip buyers out there with some fingers left on their hands that they want to get sliced off (data via YCharts):
Cloudflare, a cybersecurity company, reported earnings late Thursday – yup, another huge loss. While revenues jumped 47%, the operating loss jumped 73%. The more they sell, the more they lose – following the Silicon Valley growth model during the free-money-virus era. Guidance was also light.
But the free-money-virus is fading, and brains are recovering from it, and on Friday its shares kathoomphed 18.4%, to $41.09, down 81% from the peak in November last year.
The stock is roughly eight months behind the first batch of heroes in my pantheon of Imploded Stocks that started to come unglued in February 2021 (data via YCharts):
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
Carvana stock craters as outlook darkens for used vehicle market
Shares of Carvana were on pace for their worst day on record Friday after the company missed Wall Street’s top- and bottom-line expectations for the third quarter as the outlook for used cars falls from record demand, pricing and profits during the coronavirus pandemic.
The stock cratered roughly 40% in midday trading. Shares of the online used car retailer have plummeted by more than 95% this year, after hitting an all-time intraday high of $376.83 per share on Aug. 10, 2021. Carvana’s current worst day of trading was a 26.4% decline on March 18, 2020.
The stock is close to its all-time low of $8.14 a share, which occurred less than a week after the stock started trading publicly on April 28, 2017.
Morgan Stanley on Friday pulled its rating and price target on Carvana. Analyst Adam Jonas cited deterioration in the used car market and a volatile funding environment for the change.
“While the company is continuing to pursue cost cutting actions, we believe a deterioration in the used car market combined with a volatile interest rate/funding environment (bonds trading at 20% yield) add material risk to the outlook, contributing to a wide range of outcomes (positive and negative),” he wrote in a note to investors Friday.
Pricing and profits of used vehicles have been significantly elevated as consumers who couldn’t find or afford to purchase a new vehicle opted for a pre-owned car or truck. Inventories of new vehicles have been significantly depleted during the coronavirus pandemic largely due to supply chain problems, including an ongoing global shortage of semiconductor chips.
But rising interest rates, inflation and recessionary fears have led to less willingness by consumers to pay the record prices, leading to declines for Carvana and other used vehicle companies such as CarMax.
Large franchised new and used vehicle dealers such as Lithia Motors and AutoNation warned of softening in the used vehicle market when recently reporting their third-quarter results.
Carvana CEO and cofounder Ernie Garcia on a call Thursday described the next year as “a difficult one” for the company, citing a normalization of the used vehicle industry from its inflated levels and increasing interest rates, among other factors.
“Cars are an expensive, discretionary, often-financed purchase that inflated much more than other goods in the economy over the last couple years and it is clearly having an impact on people’s purchasing decisions,” he said.
Garcia described the end of the third quarter as the “most unaffordable point ever” for customers who finance a vehicle purchase.
Nearly all aspects of the Carvana’s operations declined from a year earlier during the third quarter, including a 31% decrease in gross profit to $359 million. Its retail units sold declined 8% compared with the third quarter of 2021 to 102,570 vehicles, while gross profit per unit — a highly watched metric by investors — declined by more than $1,100 to $3,500.
Carvana posted a wider-than-expected loss of $2.67 per share. Revenue also came in below expectations at $3.39 billion, compared with estimates of $3.71 billion, according to Refinitiv.
— CNBC’s Michael Bloom contributed to this report.
Online car dealer Carvana banned from Illinois for second time
Check out what’s clicking on FoxBusiness.com.
Online car dealer Carvana has been barred from doing business in Illinois over issues with consumers receiving vehicle registrations and titles. This is the second time in two months the company has been hit with a ban.
The Illinois Secretary of State’s office said Monday the company’s dealer’s license had been suspended because car buyers did not receive their titles. A car’s title is essential, as it proves ownership of the vehicle. Furthermore, the vehicle cannot be driven or sold without a title.
Secretary of State spokesman Henry Haupt told Fox 32 Carvana unlawfully issued consumers temporary vehicle registrations from other states, and had done so without using a licensed remitter.
The company’s business practices have been under investigation from the Secretary of State’s office since February following a number of customer complaints.
CARVANA ALLEGEDLY LEAVING CAR BUYERS ON THE HOOK AFTER SELLING CARS WITHOUT TITLE
A logo sign outside of a Carvana car vending machine in Gaithersburg, Maryland, on February 10, 2019. (Kristoffer Tripplaar/Sipa / Reuters Photos)
The state had suspended Carvana’s business operations on May 10, but lifted the restriction on May 26 after lengthy negotiations. This allowed the dealer to resume sales in Illinois under strict guidelines.
The Secretary of State’s office said Monday the suspension against Carvana was reinstated after the company’s business practices continued “in a manner that violates Illinois law.”
Haupt said Carvana will still be allowed to deliver vehicles that have already been purchased, but will be prohibited from making any new car sales.
COLORADO MAN ACCUSES CARVANA OF SELLING HIM STOLEN, DAMAGED VEHICLE
Signage outside a Carvana Vending Machine location in Novi, Michigan. (Emily Elconin/Bloomberg via Getty Images / Getty Images)
He said the suspension will remain in place until the company fixes all the existing issues.
The Secretary of State’s office encouraged buyers who have encountered issues with their vehicle’s title and registration purchased from Carvana to file a complaint with the Illinois Secretary of State Police.
GM LACKS PARTS TO HANDLE RECALL IT ISSUED
Vehicles sit inside the Carvana Co. car vending machine in Frisco, Texas, on Thursday, June 8, 2017. (Laura Buckman/Bloomberg via Getty Images / Getty Images)
CLICK HERE TO GET THE FOX BUSINESS APP
“My top commitment is protecting the interests and well-being of Illinois consumers,” Illinois Secretary of State Jesse White said. “I applaud the Illinois Secretary of State Police for their ongoing efforts to protect customers. We will continue to do everything we can to ensure that every customer is properly served.”
CEO’s Dad Gets a $3.6 Billion Stock Windfall at Carvana
Aside from Jeff Bezos, Mark Zuckerberg and members of Walmart Inc.’s Walton family, no individual has earned more from selling stock in their company over the past year than a used-car magnate from Arizona.
Company filings show Ernie Garcia II, the father of Carvana Co.’s chief executive officer, has sold more than $3.6 billion of stock since October. The sales amount to 16% of his holdings in the company. He has benefited from an ownership structure that confers benefits on him and his family and allows them to maintain control of the business, according to company filings. Some of these benefits can come at the expense of other shareholders, according to the filings, a lawsuit, and corporate governance and tax analysts.
Dow Jones Today Jumps, Nasdaq Lags After July Payrolls Surprise; Switch, DraftKings, Carvana, Monster Rally On Earnings| Investor’s Business Daily
The Dow climbed, the Nasdaq lagged at the starting bell Friday, as markets figured in a raft of earnings news and positive July payrolls data. Earnings sent Textainer Group, Monster, Switch and IBD 50 stock Carvana sharply higher. China stocks rebounded, and JPMorgan rallied to the top of the Dow Jones today, as bond yields climbed after the payrolls report.
X
The Dow industrials rattled off a quick 175-point gain, rising 0.5% to firm up the index’s stance above 35,000. The S&P 500 tacked on a 0.2% gain. The Nasdaq Composite backed off 0.2%, Illumina (ILMN) and Dexcom (DXCM) dropped to the bottom of the Nasdaq 100.
At the top of the Nasdaq 100, Monster (MNST) jumped 4% after turning in a solid second-quarter sales and earnings win. Shares fell in eight of nine sessions ahead of earnings, leaving the stock 8% below a 99.34 buy point.
Chip stocks shook off early weakaness, with Advanced Micro Devices (AMD) rallying 1.8% on the Nasdaq 100.
On the IBD 50 list, online auto retailer Carvana (CVNA) jetted 6% higher in early action. The Tempe, Ariz.-based outfit reported a surprise second-quarter profit a big sales jump late Thursday. The stock opened in extended territory, above a 323.49 buy point.
Container freight lessor Textainer Group Holdings (TGH) scrambled more than 3% higher on earnings news. The stock closed Thursday 11% below a cup-base buy point at 36.29.
Century Casinos (CNTY) and DraftKings (DKNG) were up sharply after early Friday earnings reports. Data center operator Switch (SWCH) soared 20% on raised guidance after a mixed second-quarter report late Thursday. Groupon (GRPN) also spiked 15% following a strong second-quarter report.
Dow Jones Today: Walmart Up, Apple Down
JPMorgan (JPM) set up a strong early pace, surging 2% on the Dow Jones today. The move sent shares back above support at their 50-day moving average, and up the right side of a two-month consolidation.
Walmart (WMT) gained on the Dow Jones today, with an early gain of 3% following a 1.7% rally on Thursday. Thursday’s move also scored a breakout past a 144.68 buy point in a nine-week flat base. Walmart stock ended Thursday in a buy range that runs to 151.91. Walmart’s Relative Strength Rating is a weak 38, and its Composite Rating from IBD lags at 63. But the stock’s seven-week advance indicates rising strength in consumer staples stocks.
Apple (AAPL) slipped 0.2% to the bottom of the Dow Jones today. CNBC reported that Chinese smartphone maker Xiaomi topped Apple and Samsung in June sales, according to a report from researcher Counterpoint. Xiaomi reportedly accounted for 17.1% of handsets sold during the month, vs. 15.7% for Samsung and Apple’s 14.3%.
Apple stock is extended after clearing a buy point in early July. It could also be seen as in a buy range, holding steady support at its 21-day moving average, above a 145.19 entry in what IBD MarketSmith analysis charts as a 23-week consolidation.
July Payrolls Surge, Unemployment Rate Drops
The Labor Department reported U.S. nonfarm payrolls expanded by 943,000 workers in July. The jump, up from a revised 938,000 workers hired in June, topped expectations for 900,000 new jobs. It also sharply decreased the unemployment rate to 5.4%, vs. 5.9% in June, undercutting projections for a decline to 5.7%.
Jobs Report: Strong Hiring Points To September Fed Taper News; Dow Jones Futures Rise, Tech Stocks Fall
The energy industry rig count from Baker Hughes is due for a 1 p.m. ET release. And the Federal Reserve delivers its June reading on consumer credit at 3 p.m. ET.
Vital Signs: Oil, Bond Yields, Bitcoin
Crude oil prices flattened, with West Texas Intermediate futures hovering between $69 and $70 a barrel.
The 10-year bond yield climbed to 1.28%, a big jump from Thursday’s settle just above 1.21%, and angling toward a third straight advance. Yields are on positive ground for the week, set to snap a string of 10 losses in 11 recent weeks.
Stock Market ETF Strategy And How To Invest In The Current Uptrend
Bitcoin jumped 8% higher, trading in a range between $37,716 and $41,377 over the past 24 hours. The cryptocurrency hit a two-month high above $42,300 on July 31.
China Volatility Continues
China’s markets ended the week on a quiet note, with Hong Kong’s Hang Seng Index down 0.1% and the Shanghai Composite posting a 0.2% decline. For the week, the Hang Seng added 0.8%, regaining composure after the prior week’s 5% dive. The Shanghai benchmark regained 1.8%, up from a 4.3% loss in the previous week.
Among China gauges in the U.S. early Friday, the iShares MSCI China ETF (MCHI) dropped 0.2%, and the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) faded 0.4%. Technology tracker KraneShares CSI China Internet ETF (KWEB) rose 1.3% in early trade.
In Japan, Tokyo’s Nikkei 225 added 0.3% on Friday. That gave it a 2% gain for the week, but the index remains in a six-month downtrend.
Europe’s markets headed higher in afternoon trade. The CAC-40 in Paris showed a 0.6% advance. Frankfurt’s DAX gained 0.3%. London’s FTSE 100 dipped edged up 0.1%. The SPDR Portfolio Europe ETF (SPEU) slipped 0.4%, after posting a 0.6% gain Thursday. The ETF is up 1% for the week, and just below a 44.06 entry in an eight-week flat base.
Nasdaq, S&P 500, Dow Jones Today
Heading toward Friday’s starting bell in the first week of August, the Dow Jones today has a 0.4% gain for the week through Thursday. The S&P 500 has climbed 0.8%. The Nasdaq Composite is up 1.5%. Year to date, the Dow is up 14.6%. The Nasdaq has climbed 15.6%. The S&P 500 still holds the lead so far in 2021, up 17.9%.
For more detailed analysis of the current stock market and its status, study the Big Picture.
S&P 500: Early August Winners
The week’s largest gains among S&P 500 stocks included a 24.9% breakout rally from Cross Country Healthcare (CCRN). The surge followed a firm second-quarter beat, reported late Wednesday. It left shares extended just beyond a buy range in a breakout above a cup base buy point at 19. Cross Country ranks a healthy 98 Composite Rating from IBD, and Benchmark upgraded the stock to a buy, with a 22 price target, on Thursday.
Under Armour (UA) spiked more than 21% after a stronger-than-expected report early Wednesday. That moved the stock to within 3% of a 21.92 buy point in a 13-week cup base. Under Armour’s Composite Rating is a 91.
Broadcast infrastructure gear maker Harmonic (HLIT) bolted almost 15% higher. The stock holds an 87 Composite Rating from IBD.
U.K.-based apparel manufacturer Capri Holdings (CPRI) gained more than 4% in a third-straight weekly advance. The stock ended Thursday less than 2% below a 59.70 entry in what IBD MarketSmith analysis identifies as a 12-week consolidation. Capri’s Composite Rating is 94.
Power Integrations (POWI) turned in a 2% advance, adding a third week to its rally. Shares finished Thursday low in a buy range, above a 99.15 buy point in a 29-week base. POWI stock rates a solid 97 Composite Rating from IBD.
Find Alan R. Elliott on Twitter @IBD_Aelliott
YOU MAY ALSO LIKE:
Best Growth Stocks To Buy And Watch
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today
Track Daily Stock Market Action With The Big Picture