Carvana Co. ( NYSE: CVNA ) lost two of the few remaining bulls on its stock as bankruptcy come to the fore.
Analysts at both William Blair and Needham & Company moved to the sidelines, advising clients that the latest maneuvers by creditors are a bearish signal that cannot be ignored. While both firms believe the company can indeed survive, they can no longer recommend the stock as a Buy.
“While our model continues to forecast the company has enough liquidity to make it through 2023, the model is also predicated on markedly improved trends beginning in early 2023, which rising interest rates and greater consumer fragility could imperil,” William Blair analyst Sharon Zackfia said.
She advised that trends for used cars are more important for investors to watch into the new year. The longer that prices continue to fall, the more pressure is likely to bear down on the company and its fragile liquidity. As a result, Zackfia lowered her rating on the stock to Market Perform from Outperform.
“Should the company be able to navigate the near-term, we continue to believe value exists in Carvana’s customer-friendly, digitally enabled model, as evidenced by sales outperformance relative to the industry continuing this year,” she concluded.
Similarly, Needham moved from Buy to Hold on Friday, advising that market fears of an imminent bankruptcy are likely to keep shares under pressure.
“It's possible the market is implying a near-term bankruptcy filing given the 25% decline in CVNA shares over the past two days despite the company's potential sources of cash (vehicle inventory and unpledged real estate),” the firm’s analysts wrote. “Nevertheless, CVNA's 2nd round of layoffs lowers our confidence in management's turnaround plans, and we don't yet see a long-term solution.”
Shares of Carvana ( CVNA ) fell 4.64% in premarket trading, a modest move in light of wild swings in recent days. The Arizona-based online auto seller’s stock has crashed 97.93% in 2022.
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Carvana bulls throw in the towel, shift to Neutral