Carvana business de-scaling overshadows cost cuts, says JPMorgan

JPMorgan analyst Rajat Gupta says that while Carvana’s execution on costs helps cash burn in the near-term, de-scaling of business, with units down 25% year-over-year, ‘continues to overshadow." The firm’s EBITDA estimates move higher on the cost cuts, but it says this is still not enough to solve the company’s "ongoing drain on liquidity and the increasing debt burden." The analyst’s updated enterprise value, on slightly higher out-year EBITDA assumptions, continues to suggest little equity value. However, in the near-term, the stock will continue to trade on news around funding outcomes that could provide the company runway to showcase free cash flow profitability, which is likely only by 2026, contends JPMorgan. It keeps a Neutral rating on the shares.