In a note reviewing automotive e-commerce, Piper Sandler analyst Alexander Potter downgraded three names, but reiterated confidence in Carvana ( NYSE: CVNA ).
In a note to clients on Thursday, Potter cut CarGurus ( NASDAQ: CARG ) to Sell and stepped to the sidelines on both ACV Auctions ( ACVA ) and Shift Technologies ( SFT ) from prior Buy ratings. He cited the run-up for the stocks to start 2023 as well as persistently high prices for autos as reasons to take a pause.
“Cars are becoming unattainably expensive, thanks to costlier debt and a shift toward electrification. Looser supply chains and post-COVID deflation probably cannot rectify this,” Potter wrote. “As a result, we think car sales will not revisit historical norms in the coming years.”
Nonetheless, he retained an Overweight rating on Carvana ( CVNA ), but noted that this rating is a “special situation.”
“CVNA has risen by 168% since Jan 1 (the best-performing stock in our coverage so far in 2023). But at $12.69, CVNA is far below its mid-2021 highs above $350,” Potter wrote. “While slashed estimates are forcing our DCF-based price target to $21 (down from $45), we don't think CVNA will go bankrupt. The binary nature of this thesis keeps us Overweight.”
Carvana ( CVNA ) shares slipped 6.78% on Thursday. CarGurus ( CARG ), ACV Auctions ( ACVA ), and Shift Technologies ( SFT ) slipped 3.35% , 2.22% , and 2.68% , respectively.
Read more on the short squeezes fueling rallies in meme stocks to start 2023 .
For further details see:
Piper Sandler cuts CarGurus to Sell, stays bullish on Carvana