Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Carvana drops as JPMorgan cuts, says stock disconnected from fundamentals after 720% YTD rally

Published 07/13/2023, 07:07 AM
© Reuters Carvana drops as JPMorgan cuts, says stock disconnected from fundamentals after 720% YTD rally

JPMorgan analysts downgraded Carvana (NYSE:CVNA) to Underweight from Neutral with a price target of $10 per share.

The price target implies a downside risk of 75% given that CVNA shares closed at $38.89 on Wednesday. The analysts argue that CVNA valuation “has once again disconnected materially from fundamentals.”

“We noted last month that CVNA should consider an equity raise (when shares were at $24) which would de-risk BS concerns further and with shares continuing to rally over the last month, it further reduces eventual dilution from an equity offering. The ideal outcome in our view, would still be a debt/equity exchange of some form, particularly involving the expensive 2030s while also de-risking the 2025s,” they said in a downgrade note.

The main factor behind JPMorgan’s downgrade is swollen valuation.

“We believe current valuation, at an EV of ~$14 bn with implied EV/EBITDA of ~35x on FY25 (vs bellwether e-comm peers at ~13x) is baking in a stronger than anticipated return to growth and related operational leverage in 2024 and beyond for which we have little conviction today.”

Carvana shares are up 720% year-to-date. The stock fell 4% on the JPMorgan downgrade news.


Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.