Shares of
Carvana
may have reached their peak and their path ahead looks uncertain, an analyst said in a note published Friday.
Mitch Ingles from Raymond James writes that all the “good news seems already reflected in the stock price,” while near-term growth for Carvana is threatened by consumers’ inability to afford cars as interest rates remain high. The analyst cut his rating on shares to Underperform, an equivalent to Sell, from Market Perform.
“We expect investors to adopt a ‘wait-and-see’ approach, looking for clear indicators of improved sales growth,” Ingles added.
Shares of Carvana, an e-commerce platform for buying and selling used cars, soared 1,017% last year and another 8.8% so far this year. The gains stem partly from Carvana’s ability to restructure its debt and perform operational improvements—such as lowering costs at inspection centers and insourcing services last year.
Around 40% of Carvana’s shares available for trading were held by short sellers in August, according to FactSet. As of today, that number is closer to 36%. Those shorts sellers might have rushed to close their positions last year after positive updates from the company, creating a so-called short squeeze that magnified the gains.
The rate cut from Raymond James comes less than a week before Carvana posts its fourth-quarter earnings on Feb. 22. Carvana has posted a year-over-year decline in sales growth since the third quarter of 2022.
Carvana stock was down 8.8% to $52.58 on Friday. Competitor
CarMax’s
stock was down 2% while the broader market, as measured by the
S&P 500,
declined 0.2%.
Meanwhile,
Vroom,
another competitor, recently decided to discontinue its e-commerce used-car selling operations and lay off most of the associated staff. The stock was down 9.5%.
Write to Karishma Vanjani at [email protected]
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