CVNA - Carvana Isn't A Buy Now But It Belongs On Your Watchlist
2024-05-21 10:04:39 ET
Summary
- Carvana got off to a rocky start.
- But recent results show the company is getting its act together.
- It’s increasingly looking like it may succeed in its quest to dominate used-car e-commerce.
- Financial ratios remain awful, but I believe creditors will keep accommodating Carvana’s needs as long as they believe the company can succeed.
- But a compelling company doesn’t always make for an immediately compelling stock.
Carvana (CVNA) shares have had a turbulent start.
The stock debuted April 27, 2017. It eventually became a pandemic superstar. Online used-car shopping appealed greatly to homebound buyers. So the stock soared from its $11.10 day-one close to an August 2021 $361.50 peak.
But like many Covid leaders, it abruptly turned south. On December 27, 2022, it closed at $3.72. That was 99% below its peak!
This wasn’t simply a case of the archetypical Mr. Market being too exuberant one day and too depressed the next, as Warren Buffett suggests he is.
Carvana followed a well-trod emerging-company path. Stocks fly way higher than justified by the business’ financial performance. And then, reality takes hold.
Sometimes, though, reality overreacts.
At least that’s the position of those who’re now buying the stock, after its having rallied from its trough to around $117....
Carvana Isn't A Buy Now, But It Belongs On Your Watchlist