Monday, March 27, 2023
HomeMarketCarvana Stock Surged This Week. Analysts See It Heading Lower.

Carvana Stock Surged This Week. Analysts See It Heading Lower.

Carvana stock was near $16 on Friday, compared with almost $380 in August 2021.

- Advertisement -

Joe Raedle/Getty Images

‘s weeklong stock surge left the company’s shares trading above analysts’ expectations despite doubts that the gain reflects any fundamental brightening of the outlook for the company.

Company shares traded at $15.91 late Friday morning, up almost 12% from the previous day’s close, and up 145% from their close on Jan. 26, when the recent rally kicked off. Shares are down from a high of almost $380 in August 2021.

The shares were trading nearly 50% above the average target price of $10.69 among Wall Street analysts tracked by FactSet who cover the company. 

Wedbush analyst Seth Basham, whose $1 target is the lowest of the group, said he saw ”no fundamental reason” for the shares’ appreciation. “Carvana has been a top mention on Reddit (second only to
),” he wrote in an email. Users of the online platform are “likely boosting stock and squeezing shorts,” or pushing people who had bet against the shares to close out their positions to avoid losses.

Carvana had no immediate comment on the stock’s performance.

The company’s shares sank to a low of under $4 in December following reports that its creditors were strategizing among themselves to prepare for a possible restructuring of its debt and that Carvana was consulting lawyers and investment bankers on its debt load.

Basham has said that Carvana may struggle to generate enough cash to keep its business afloat through 2023. He referred to its $2.2 billion acquisition earlier this year of Adesa’s physical car auction business using high-interest debt as “an albatross around its neck.”

Carvana has said it is following a “plan to profitability” that largely consists of reductions in its operating costs. In November, it announced that it was laying off about 1,500 employees, or about 8% of its staff. It was the second round of job cuts in just over six months. 

The company has also faced lawsuits and state regulatory actions over delays in getting vehicles registered to its customers and misuse of temporary license plates. Last month, it reached a settlement with Illinois that requires the company to admit that it broke state law and to surrender a $250,000 bond.

Carvana has said that relatively few of its customers have been affected by the registration delays. The agreement with Illinois “allows us to move forward in our journey to becoming the largest automotive retailer,” it said when that deal was announced. 

On Wednesday, when shares traded as high as $13.45, analysts at
J.P. Morgan
led by Rajat Gupta reiterated a price target of $5, citing the company’s cash burn and potential action by creditors as weighing on investors’ minds. 

“We believe investor confidence around liquidity bandwidth and outcome of debt restructuring negotiations (if any) will be key to how it trades in the near term,” the analysts wrote. “Used retail backdrop remains challenging as ongoing affordability headwinds weigh on consumer sentiment and purchasing power.”

Basham said it was “not out of the question” that Carvana might consider addressing its liquidity needs through a new equity offering at the stock’s current market price. “But we have not heard that one is in motion,” he added.

Write to Jacob Adelman at


- Advertisment -

Most Popular