Citi encouraged with accelerating retail unit sales at Carvana

Citi analyst Ronald Josey keeps a Neutral rating on Carvana with an $11 price target after the company announced plans to conduct a debt exchange offer for a portion of its debt that, if fully subscribed, would replace $1.3B of unsecured notes with $1B of secured debt while extending the repayment date on the earliest portion of its existing notes to 2028. Should the exchange be accepted, Carvana would lower its interest expense by $100M annually, providing the company with additional balance sheet flexibility, the analyst tells investors in a research note. Concurrently, Carvana released updated Q1 guidance ranges suggesting improving demand trends as the quarter progressed, says the firm. Citi is encouraged with Carvana’s accelerating retail unit sales as the company makes progress towards its adjusted EBITDA breakeven plans, though it believes visibility remains limited.