Carvana (NYSE:CVNA) has had its ups and downs lately, though admittedly, it’s been mostly downs. And it’s down again today, despite the return of one analyst who stopped covering Carvana a while back. It’s the triumphant return of Adam Jonas of Morgan Stanley, who offered up an “equal-weight” rating on Carvana.
That’s not as rosy as it might be, but certainly better than an outright call to sell and run for the hills while you still can. But Jonas had an explanation ready to go for his assertion, noting that Carvana now has “adequate capital” as well as a “…now-proven diligence around SG&A cost-cutting.” Jonas also suggests that Carvana should have enough liquidity to ride out current conditions without having to go to the well for equity funding or taking on new debt.
Not everyone else is so sure. For instance, a recent report in the Wall Street Journal noted that Carvana is having trouble getting customers thanks to its repeated inventory reductions. Just a couple weeks ago, Carvana reported that it sold 79,240 cars. That’s 25% fewer cars than the same time last year. Part of the conditions that gave Carvana sufficient liquidity also reduced the number of cars they had on hand to sell. That’s going to mean trouble eventually; when customers show up ready to buy and Carvana has nothing to sell, those customers will buy elsewhere.
Meanwhile, most analysts are convinced that Carvana is merely worth a Hold, like Adam Jonas. With two Buy ratings, one Sell, and 14 Holds, analyst consensus is clear that Carvana stock is a Hold. Further, with an average price target of $10.58, Carvana stock offers investors 2.98% downside risk.
