EV - Why Is Carvana Stock Behind the Market?
Carvana stock ( NYSE:CVNA ) had a mediocre day on Tuesday, behind the overall stock market. While the S&P 500 index sped through that particular traffic light, the huge car retailer’s shares rose modestly, falling short of the 1% level. The main cause was a downgraded analyst recommendation.
So, what happened to Carvana Stock?
We may now remove Wedbush forecaster Seth Basham from the Carvana analyst bullpen.
Not only did Basham downgrade the stock’s rating to neutral from outperform (buy) , but he also slashed its price objective by a significant amount. He now estimates the shares are only worth $15 each, a significant decrease from his previous estimate of $50.
Basham’s new, more pessimistic perspective stems from the vehicle industry’s overall health and company-specific issues. In the research note outlining the downgrade and target price decrease, he said that “further worsening in market circumstances, a bloated cost structure, and excessive cash burn” combined significantly diminished Carvana’s potential.
So, what now?
Basham sees Carvana’s troubled finances as another red flag for the company’s future. According to the prognosticator, the firm is facing $336 million in higher annual interest expenditures as a result of its May purchase of the Adesa vehicle auction business from rival KAR Global (KAR 2.67%). As a result, it is in danger of cash flow problems by the end of 2023.
According to the analyst, Carvana will need extra cash, and the most simple trigger is a capital raise – which risks d...
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