) to Overweight from Neutral on Monday, even as he lowered his price target to $73 from $98. The stock is now a 10th as valuable as it was a year ago, suggesting it is now “grossly undervalued,” he wrote.
“CVNA could easily continue falling, but with so much potential upside, we think investors should consider owning at least some CVNA,” Potter wrote in a research note.
Potter estimates that Carvana’s sales volume will reach 3.3 million units in 2035, accounting for about 8% of the U.S. used car market. Rising volumes, in turn, will boost Ebitda margins, or margins after earnings, interest, taxes, depreciation, and amortization.
The analyst recognized that before the company can achieve its long-term potential, it needs to survive the following quarters. Carvana has been under pressure by declining demand for used cars amid a slowing macroeconomic environment. There are also some concerns about the company’s acquisition of physical auction brand ADESA for $2.2 billion. Potter called the move a “sound strategic decision,” but acknowledged it was “crummy timing” due to the debt Carvana will have to take on.
Barron’s reported earlier this summer on how the company’s growing pains had led to paperwork delays, including failing to register new cars under customers’ names. Regulators in Illinois have filed criminal charges against the company and have looked to suspend the company’s license in the state.
Carvana stock jumped in premarket trading, rising 6.2% to $38.90. The shares have lost 84% this year.
Carvana Stock Is ‘Grossly Undervalued,’ Analyst Says
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Carvana stock has lost 84% this year.
Mark Ralston / AFP via Getty Images
Declining prices for used cars, rising interest rates, and a series of regulatory challenges have pummeled
Carvana
stock over the past few months. It’s time to plunge back in and buy the shares, according to Piper Sandler.
Analyst Alexander Potter upgraded shares of Carvana (ticker:
CVNA
) to Overweight from Neutral on Monday, even as he lowered his price target to $73 from $98. The stock is now a 10th as valuable as it was a year ago, suggesting it is now “grossly undervalued,” he wrote.
“CVNA could easily continue falling, but with so much potential upside, we think investors should consider owning at least some CVNA,” Potter wrote in a research note.
Potter estimates that Carvana’s sales volume will reach 3.3 million units in 2035, accounting for about 8% of the U.S. used car market. Rising volumes, in turn, will boost Ebitda margins, or margins after earnings, interest, taxes, depreciation, and amortization.
The analyst recognized that before the company can achieve its long-term potential, it needs to survive the following quarters. Carvana has been under pressure by declining demand for used cars amid a slowing macroeconomic environment. There are also some concerns about the company’s acquisition of physical auction brand ADESA for $2.2 billion. Potter called the move a “sound strategic decision,” but acknowledged it was “crummy timing” due to the debt Carvana will have to take on.
Barron’s reported earlier this summer on how the company’s growing pains had led to paperwork delays, including failing to register new cars under customers’ names. Regulators in Illinois have filed criminal charges against the company and have looked to suspend the company’s license in the state.
Carvana stock jumped in premarket trading, rising 6.2% to $38.90. The shares have lost 84% this year.
Write to Sabrina Escobar at [email protected]
Source: https://www.barrons.com/articles/carvana-stock-price-buy-sell-upgrade-51662983162?siteid=yhoof2&yptr=yahoo