There have been a number of covid high flyers that are absolutely crushed right now. What are your picks for companies that could be bankrupt within a year? Any you think could turnaround?
For bankruptcy, Carvana is knocking on Chapter 11's doorstep. Revenues are dropping, sales are down, gross profits are down (Q3 was $359M), and their Q3 earnings were the most negative in their history (-$200M). The value of their cars will continue to drop as recession fears and interest rates rise and the chip shortage abates further lowering gross profits. And most importantly, with a $316M in unrestricted cash, their Q3 adjusted EBITDA was -$200M, which doesn't even include their interest expense which is almost half of their gross profits (they have a net debt of ~7B). I'm watching this one closely, so that I can buy a car when they have to liquidate.
My pick for turnaround is controversial. I'm going with PTON. I don't own any shares in them btw, but I've been following out of interest. Their CEO is doing an amazing job restructuring the business, all of the hard decisions on cost cutting have already been done, and managements plans for expanding the TAM, opening new product lines, and offering more affordable options like allowing their software on 3rd party platforms, rental equipment as a service, and making their app freemium, has potential to expand growth once they've stabilized. It's still high risk, but I've been impressed with how quickly they've moved and their creativity.
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