CVNA - Carvana: A One-Year Wonder Fueled By Unsustainable Factors
2024-03-20 13:45:54 ET
Summary
- Auto loan delinquencies are at their highest levels since 2010 which could have an impact on auto loan ABS offerings this year.
- Carvana’s free cash flow in 2023 was mainly due to inventory shrinkage and returning to growth will negatively impact its ability to generate free cash flow in the future.
- Carvana posted a positive operating cash flow in 2023 due to inventory drawdown and selling more loans than originated which is unsustainable in my opinion.
- My price target for Carvana is $17.06 per share, 78% lower than its current valuation.
Over the past year, Carvana Co. ( CVNA ) has outperformed the market with the stock up 1050% over that period against a 31.8% increase in the S&P 500. The bullish sentiment surrounding Carvana is due to the company restructuring the majority of its debt which gives it more time to deal with it. That said, Carvana is extremely overvalued at its current valuation, in my opinion, due to the rising delinquency rates among auto loan borrowers....
Carvana: A One-Year Wonder Fueled By Unsustainable Factors