Latest news with #CVNA
Business Insider
18 hours ago
- Automotive
- Business Insider
Why High-Revving Carvana (CVNA) is a Hold Despite Market U-Turn
Carvana Co. (CVNA), the online used-car retailer, appears to be in the midst of an extraordinary rebound. After teetering on the edge of collapse just a few years ago and experiencing a hype-driven surge in 2021, the stock has staged one of the most impressive comebacks in recent U.S. stock market history. Over the past three months, CVNA stock has risen by almost 64%, eclipsing the S&P 500 (SPY), according to TipRanks' charting data. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. There's no doubt the company deserves credit for this. For the market to have been so wrong about its value over such a relatively short time, and then to regain confidence by delivering a now well-rounded and booming business, has driven the stock to trade at a valuation premium that, in my view, borders on being excessive. While it's hard to argue against the strong bullish momentum and consistent upward revisions to both top and bottom lines, I do see some structural red flags suggesting the stock might be overpriced at current levels. That introduces a level of instability to the long-term thesis. Despite the stock's rampant appreciation in recent weeks, I remain Neutral on CVNA. From Near Collapse to Record Performance When a company loses ~98% of its market value in a short period and still manages to stay alive, I like to think there's something fundamentally resilient or strategic about its operations—something that goes beyond simple market volatility. That's precisely the case with Carvana. From mid-2021 to early 2022, the company nearly collapsed in the face of a brutal market environment, as the entire automotive sector was hit by the global semiconductor shortage and supply chain disruptions. These issues drove up the prices of used vehicles, while also putting massive pressure on inventories and delivery capacity. To make matters worse, Carvana was carrying a substantial debt load— approximately $8 billion in net debt in 2022, compared to $3.7 billion today —to fuel its rapid expansion and operations. Back then, it was posting negative EBITDA of $2.1 billion, while today it's delivering positive EBITDA of $1.3 billion. With these operational challenges, its cash flow just couldn't keep up with the mounting interest payments and debt, raising real doubts about the company's survival. But over the last two years, Carvana's 'resilience' has come from a mix of factors: (1) an innovative business model that reinvented the way people buy used cars by offering a fully digital experience; (2) a strong tech backbone that lets it scale operations fast; and (3) maybe most importantly, a management team laser-focused on tightening operations, extending debt maturities, and securing more sustainable sources of funding. As a result, Carvana has generated nearly $1 billion in free cash flow over the past twelve months. In its most recent quarter, it reported record results, growing retail units sold by 46% year-over-year and posting its highest-ever EBITDA margin of 11.5%, nearly double the average of around 6% for public auto dealers. The bold goal ahead is for Carvana to achieve 3 million annual retail sales over the next decade while maintaining healthy margins. The Hidden Flaws in Carvana's Story After returning almost 100x since hitting its bottom in 2022—and gaining 148% in the last twelve months alone—it seems surreal, but CVNA is finally very close to reclaiming its peak from August 13, 2021. The main problem, however, as highlighted by famed short-seller Jim Chanos —who still holds a short position in CVNA—is that the market treats Carvana's story like secular growth, when in reality this is a cyclical business. Not only that, another worrying point is that critics (most notably Hindenburg Research) flag risks tied to 'creative accounting' at Carvana, mainly the fact that its recent profitability relies heavily on selling subprime loans, not just on used-car sales margins. On Carvana's side, the company does officially confirm that it originates and sells subprime loans, profiting from the upfront gain at the time of securitization. The concern is that these gains are so substantial that they may be artificially inflating operating profit and masking risks, particularly around related parties and credit quality. And arguably, this matters a lot for a company trading at 70x forward earnings, while peers like CarMax (KMX) trade at just 16x. The issue, in my view, is that as analysts continually revise revenue and EPS estimates upward—in just the last six months, the EPS projection has swung by more than 100%—the market appears somewhat too comfortable in brushing aside the risks behind this model to justify a sizable premium. Insiders Cash Out, Shorts Step Back Over the last three years, CVNA stock bears have consistently bet on CVNA's decline, especially at the beginning of 2023 when short interest climbed as high as 54% of the company's outstanding shares. During that stretch, short interest averaged ~26%, but today, in a clear sign of surrender, only about 9% of outstanding shares remain sold short. To me, that makes the current price even riskier—the bull case looks overpriced, and this low short interest is a dangerous sign of complacency. Not to mention, in my view, the structural bear thesis is still very much alive, with concerns about subprime dependency, questionable accounting, and the cyclical nature of the business. Another significant red flag is the substantial insider selling by CEO Ernie Garcia III and his father, Ernest Garcia II, who owns approximately 10% of the company. Since May, the Garcia family has sold $515 million worth of shares, in addition to another $1.4 billion sold between last April and November. Of course, insiders sell for various reasons, but they usually buy primarily because they believe the stock is undervalued or expect it to appreciate in value. That clearly doesn't seem to be the case here. Is Carvana Stock a Buy? On Wall Street, CVNA stock carries a Moderate Buy consensus rating based on 12 Buy, six Hold, and zero Sell ratings over the past three months. CVNA's average stock price target of $351.50 implies approximately 1% upside potential over the next twelve months. Carvana's Strong Narrative Mixed with High Expectations and Hold-Worthy Risks The odds are certainly in Carvana's favor for now. After all, it remains the strongest player—and arguably the disruptor—in a highly underpenetrated industry, with growth projections that aren't inflated but backed by a massive, proven turnaround over the last few years. However, while some premium is well-deserved, Carvana's business still needs to be treated as cyclical. The risks associated with its financing model and corporate structure—especially given the limited transparency surrounding how earnings are organized—stand, in my view, at odds with the hefty premium the stock now commands. I don't think it's wise to go outright bearish on a stock with this much momentum and constant upward revisions. Still, I see plenty of risks that are underestimated for anyone leaning aggressively bullish in the long term. That's why, for me, Carvana is a Hold.
Yahoo
a day ago
- Automotive
- Yahoo
Will Strategic Use of ADESA Infrastructure Support Carvana's Goal?
Carvana Co. CVNA is striving to improve in every aspect of its business. It is vigilant about where it earns money and where it spends it. It has an ambitious goal of selling 3 million cars a year and achieving 13.5% adjusted EBITDA margins within the next 5 to 10 years. To achieve this goal, it has been increasing the number of cars it can get ready for sale quickly. Over the past year, it has been working out of about 23 locations on average. In the future, it expects to grow that number to around 60 locations, as the addition of more locations makes it easier to scale up May 2022, CVNA bought ADESA to expand its market presence. The acquisition came with a lot of valuable infrastructure. Since then, Carvana has been steadily opening mega sites that can handle both auction capabilities and reconditioning addition, the company already owns inspection centers that are not being used to their full potential. So instead of needing to build everything from scratch, Carvana can grow by making better use of the facilities it already has. Of course, this growth will still require some spending, but overall, compared to other companies with similar opportunities, Carvana believes it's in a great position to grow efficiently. CVNA carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks CVNA expects to improve its margin, other auto retailers like Lithia Motors, Inc. LAD and AutoNation, Inc. AN struggle to maintain healthy reported an adjusted EBITDA margin of 4.4% in the first quarter of 2025 compared to 4% in the year-ago period. High tariffs could cause automakers and parts suppliers to raise prices, forcing Lithia to pass those higher costs on to customers. More expensive vehicles could discourage buyers, leading to lower sales volumes. To stay competitive, Lithia might need to offer discounts or incentives, which would pressure profit margins. AutoNation had been operating below 60% selling, general and administrative (SG&A) as a percentage of gross profit in 2021 and 2022. However, in 2023 and 2024, its SG&A as a percentage of gross profit increased to 63.4% and 66.6%, respectively. The company's degrading operational efficiency is worrisome. Adjusted SG&A was 67.5% of gross profit in the first quarter. The company expects SG&A as a percentage of gross profit in the band of 66-67% for the full year, which is likely to take a hit on its margin. Carvana's Price Performance, Valuation and Estimates Carvana has outperformed the Zacks Internet-Commerce industry year to date. CVNA shares have surged 70.9% compared with the industry's growth of 9.5%. YTD Price Performance Image Source: Zacks Investment Research From a valuation perspective, Carvana appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 3.61, higher than its industry's 2.17. Image Source: Zacks Investment Research EPS Estimates Revision The Zacks Consensus Estimate for 2025 and 2026 EPS has moved down 7 cents and 5 cents, respectively, in the past 30 days. Image Source: Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AutoNation, Inc. (AN) : Free Stock Analysis Report Lithia Motors, Inc. (LAD) : Free Stock Analysis Report Carvana Co. (CVNA) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
11-07-2025
- Automotive
- Yahoo
Carvana (CVNA) Rated Market Outperform on Tech-Driven Growth Amid Industry Headwinds
Carvana Co. (NYSE:CVNA) ranks among the . On July 7, Nicholas Jones, an analyst at Citizens JMP, reaffirmed a Market Outperform rating on Carvana Co. (NYSE:CVNA) with a $440 price target. The firm believes the automobile sector continues to be majorly steady despite some demand being brought forward earlier this year due to car tariff announcements and persistently high interest rates. Since the beginning of the COVID pandemic, automobile affordability has been difficult, according to Citizens JMP, which has caused issues for the broader automotive industry. That said, the analyst thinks Carvana Co. (NYSE:CVNA) possesses company-specific growth drivers that can surpass overall growth despite these industry challenges as it uses technology to lower consumer friction. Carvana Co. (NYSE:CVNA) is an online retailer of used cars based in Tempe, Arizona. Renowned for its multi-story automobile vending machines, the firm is the fastest-growing online used car dealer in the United States. While we acknowledge the potential of CVNA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. Read More: and Disclosure: None. Sign in to access your portfolio
Yahoo
10-07-2025
- Automotive
- Yahoo
Carvana (CVNA) Rated Market Outperform on Tech-Driven Growth Amid Industry Headwinds
Carvana Co. (NYSE:CVNA) ranks among the . On July 7, Nicholas Jones, an analyst at Citizens JMP, reaffirmed a Market Outperform rating on Carvana Co. (NYSE:CVNA) with a $440 price target. The firm believes the automobile sector continues to be majorly steady despite some demand being brought forward earlier this year due to car tariff announcements and persistently high interest rates. Since the beginning of the COVID pandemic, automobile affordability has been difficult, according to Citizens JMP, which has caused issues for the broader automotive industry. That said, the analyst thinks Carvana Co. (NYSE:CVNA) possesses company-specific growth drivers that can surpass overall growth despite these industry challenges as it uses technology to lower consumer friction. Carvana Co. (NYSE:CVNA) is an online retailer of used cars based in Tempe, Arizona. Renowned for its multi-story automobile vending machines, the firm is the fastest-growing online used car dealer in the United States. While we acknowledge the potential of CVNA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. Read More: and Disclosure: None. Sign in to access your portfolio
Yahoo
09-07-2025
- Automotive
- Yahoo
Carvana (CVNA) Declines More Than Market: Some Information for Investors
Carvana (CVNA) closed at $345.92 in the latest trading session, marking a -3.19% move from the prior day. This move lagged the S&P 500's daily loss of 0.07%. Elsewhere, the Dow lost 0.37%, while the tech-heavy Nasdaq added 0.03%. The company's shares have seen an increase of 5.12% over the last month, surpassing the Retail-Wholesale sector's gain of 1.87% and the S&P 500's gain of 3.94%. The investment community will be paying close attention to the earnings performance of Carvana in its upcoming release. The company is slated to reveal its earnings on July 30, 2025. The company is forecasted to report an EPS of $1.09, showcasing a 678.57% upward movement from the corresponding quarter of the prior year. At the same time, our most recent consensus estimate is projecting a revenue of $4.57 billion, reflecting a 34% rise from the equivalent quarter last year. In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of $4.99 per share and a revenue of $18.08 billion, indicating changes of +213.84% and +32.23%, respectively, from the former year. Investors should also pay attention to any latest changes in analyst estimates for Carvana. Such recent modifications usually signify the changing landscape of near-term business trends. Consequently, upward revisions in estimates express analysts' positivity towards the business operations and its ability to generate profits. Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system. The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has shifted 1.66% upward. Right now, Carvana possesses a Zacks Rank of #2 (Buy). In terms of valuation, Carvana is currently trading at a Forward P/E ratio of 71.58. This expresses a premium compared to the average Forward P/E of 25 of its industry. It is also worth noting that CVNA currently has a PEG ratio of 1.39. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CVNA's industry had an average PEG ratio of 1.44 as of yesterday's close. The Internet - Commerce industry is part of the Retail-Wholesale sector. With its current Zacks Industry Rank of 62, this industry ranks in the top 26% of all industries, numbering over 250. The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1. Be sure to use to monitor all these stock-influencing metrics, and more, throughout the forthcoming trading sessions. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carvana Co. (CVNA) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
