CVNA - Hedgeye reiterates Carvana stock a 'top short idea'

2024-02-09 11:12:34 ET

Carvana Co (NYSE: CVNA) has gained close to 30% over the past couple of weeks but Hedgeye remains dovish as ever on the online used car retailer.

Why is Hedgeye super bearish on Carvana stock?

The investment research firm said shares of the New York listed firm could be cut in half over the next eighteen months as it reiterated a top short idea on Friday.

Analyst Brian McGough cited a decline in used car prices that has pushed some dealers and online platforms into a shut down “given the inability to drive any profits” for his super bearish view on Carvana stock on Friday.

The $10.67 billion company based out of Tempe, Arizona is scheduled to report its financial results for the fourth quarter on February 22 ^nd .

Consensus is for it to lose 93 cents a share versus 97 cents per share a year ago. Wall Street currently rates Carvana stock at “hold”.

currently has rather upsized short interest

Hedgeye has been short since September. At the time the stock was trading at about $50 – a little below its current price. McGough’s report also reads:

We think the risk to the forward business performance is building and drastically mismatching the equity valuation, particularly with such a levered balance sheet.

Note that Ernie Garcia III – the chief executive of Carvana Co is positive about the future now that the online used car retailer has lowered annualised expenses by some $1.1 billion via cost cutting measures including layoffs.

The New York listed firm also recently introduced “Carli” – an artificial intelligence enabled software platform. Short interest in Carvana stock currently sits at about 40%.

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