CVNA - Carvana is downgraded at Piper Sandler on valuation call

2023-07-21 07:45:51 ET

Piper Sandler downgraded Carvana ( NYSE: CVNA ) to a Neutral rating from Overweight on a valuation call following the recent share price rally and debt restructuring development. The firm believes that chasing the stock higher would necessitate an upward revision to CVNA's long-term used vehicle market share expectations, which it does not believe recent results substantiate.

"We upgraded CVNA last September on the basis the company was trading at a significant discount to intrinsic value due to bankruptcy risk – which we thought was unlikely. Now that the bankruptcy scare has abated, and the stock has risen to $47, we believe CVNA is approaching a fair valuation," updated analyst Alexander Potter.

The firm's price target of $29 is based in part on Carvana ( CVNA ) achieving positive GAAP EPS in FY2025 and reaching a 2% market share of the used vehicle market in 2026. Carvana's ( CVNA ) weighted average cost of capital is seen rising to 16.2% from 15.1% due to increased equity as a percentage of capital.

Shares of CVNA slipped 0.66% in premarket trading to $46.42.

More on Carvana:

• Carvana spins lower after S&P warns debt deal could be tantamount to default
• Carvana pares huge gain after filing to sell 35M shares
• Carvana skyrockets after Q2 results, striking deal to restructure debt
• Seeking Alpha’s quant ratings on CVNA

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