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Wedbush analysts reiterated an Underperform rating on Carvana (NYSE:CVNA) and a $1 per share price target.
Carvana stock has crashed spectacularly in 2022 with shares trading almost 98% lower year-to-date (YTD). Earlier this month, media reports suggested Carvana could be headed toward bankruptcy.
While the analysts argue that bankruptcy is not likely imminent for the used car retailer, they believe things will only get worse from here. The analysts further lowered estimates to now sit below consensus, expecting 85k units sold in Q4, down from the prior estimate of 94k and the consensus of 96k.
The changes to Carvana’s model have been made after the analysts incorporated recent data points, including CarMax’s (NYSE:KMX) F3Q results last week.
“With used car price declines potentially accelerating, there is nowhere to hide. CVNA entered the quarter with 87 days of inventory, and our web-scraped data indicates that figure has unfavorably increased as CVNA’s sales have floundered further and inventory units for sale have only modestly declined,” they explained in a client note.
“We continue to believe that CVNA should more drastically reduce costs and look to leverage its unencumbered real estate to raise cash.”
Net-net, the analysts highlight weakening results and liquidity as two key concerns surrounding Carvana stock.
Morgan Stanley analysts also weighed in negatively on CarMax and Carvana as they believe used car prices are likely to “decrease significantly from here.”
