Jim Cramer’s Latest Lightning Round: 8 Stocks in Focus

4.  Carvana Co. (NYSE:CVNA)

Number of Hedge Fund Holders: 66

A caller asked Cramer about Carvana Co. (NYSE:CVNA) and mentioned that they bought the stock when it was $11 per share.

“Well, I’ll tell you, you’re up a lot. You take that, double your cost basis, you take out 22 bucks, you’ll have caught a double, and then let the rest run and I’ll feel terrific. I won’t have to worry about you.”

Carvana (NYSE:CVNA) operates a prominent e-commerce platform for buying and selling used cars in the United States. The company initially experienced rapid growth as it expanded into new markets and increased its customer base. However, this expansion came with substantial financial challenges, as it faced significant debt accumulation while scaling its operations.

The company spent much of 2023 retrenching its business and restructuring its debt after taking on billions of dollars during a period of aggressive growth, only to see used-car prices decline and losses increase. In response to its financial difficulties, the company entered into efforts to stabilize its operations.

According to Bloomberg Intelligence analyst Joel Levington, the company’s operational improvements are expected to be sustainable, potentially leading to a credit upgrade in the coming year. Such an upgrade could provide Carvana (NYSE:CVNA) with the opportunity to refinance its high-interest debt, thereby significantly reducing its interest payments. As of the third quarter of fiscal 2024, it reported $5.4 billion in long-term debt and paid $157 million in interest expenses, which exceeded its net income of $148 million for the period.

Levington projected that the company would pay $668 million in interest for the year and could potentially cut this figure by half if the company succeeds in securing a credit upgrade and restructuring its debt through the capital markets.