Of all the companies you probably wouldn’t expect to make a comeback, Carvana (NASDAQ:CVNA) is pretty high on most lists. When you lose your license to do business in Michigan, you know you’ve got problems. But Carvana is up a whopping 21% in Monday afternoon trading, and it’s all thanks to a turnaround story in the making that might be more likely than you’d expect.
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The word from Bank of America, via analyst Nat Schindler, is that Carvana managed to turn in a surprisingly impressive first quarter, with results proving a win over analyst expectations all over. However, Schindler also points out there’s still a lot of debt left to consider for Carvana, and that will certainly be a drag on results later. Schindler specifically noted, “…Carvana must undergo extraordinary measures to prevent the drying up of easily accessible cash by the end ’23.”
Moreover, Carvana also offered an unusually rosy outlook for its second quarter and looks to deliver adjusted profit with its second quarter, and that’s well before anyone expected it would. Of course, expectations are one thing and results another, but if Carvana can deliver on its promises, that really does suggest a turnaround in the making. Some, like Akiko Fujita, have noted that Carvana stock is already down to catastrophic levels—over 80% in the last year—so recovery from here won’t take much. And with used car prices starting to stabilize as conditions change, recovery may well follow.
Analysts are clearly sticking to the wait-and-see approach. With 14 Hold ratings, two Buys, and one Sell, it’s little surprise Carvana is considered a Hold by analyst consensus. However, Carvana stock also offers a slight downside risk thanks to its average price target of $10.50.
