Here's a quick analysis on Carvana Stock.
From a fundamental perspective, the stock still looks overvalued with an enterprise value around $10 billion.
A long position in CVNA requires a belief that the company is going to be the largest used auto dealer in the country at some point in the future.
That’s a tough belief to have given recent results in an environment that doesn’t have a flush consumer or low interest rates.
Carvana still isn’t close to profitable, even with a boost to near-term profits thanks to how the company accounts for its securitized loans. Those profits presumably recede in a tougher environment.
Meanwhile, it's still got a lot of debt on its balance sheet and is facing pressure from falling used car prices. For a more detailed analysis take a look at our website.
#investing #overlookedalpha
From a fundamental perspective, the stock still looks overvalued with an enterprise value around $10 billion.
A long position in CVNA requires a belief that the company is going to be the largest used auto dealer in the country at some point in the future.
That’s a tough belief to have given recent results in an environment that doesn’t have a flush consumer or low interest rates.
Carvana still isn’t close to profitable, even with a boost to near-term profits thanks to how the company accounts for its securitized loans. Those profits presumably recede in a tougher environment.
Meanwhile, it's still got a lot of debt on its balance sheet and is facing pressure from falling used car prices. For a more detailed analysis take a look at our website.
#investing #overlookedalpha
Category
🗞
NewsTranscript
00:00 Should you buy Carvana stock?
00:01 Carvana is an online retailer of used cars.
00:04 Fundamentally, the company looks overvalued,
00:06 with an enterprise value around $10 billion.
00:08 To buy Carvana, you really need to think
00:10 the company is going to become
00:11 the number one auto dealer in the US.
00:13 But recent results provide no indication of that.
00:15 Net income over the last 12 months was minus $619 million.
00:20 That's some revenues of $14.6 billion.
00:22 So the company's growing revenue,
00:24 but it's not making any money.
00:25 Meanwhile, the company's taken on $6.3 billion
00:28 of long-term debt,
00:29 and it's only got $1.45 billion of cash
00:31 on the balance sheet.
00:32 So the company's burning cash,
00:33 and the used car market is showing signs of weakness.
00:36 And used car prices could fall further in a recession.
00:38 There's also some questions about management.
00:40 This is actually a potential bankruptcy case,
00:42 but the stock is already down 92% year to date.
00:45 And it's got a high short interest of 30%,
00:47 which means there could be a short squeeze.
00:49 So we think it's too dangerous to short,
00:51 but it's too dangerous to go long.
00:52 This is definitely one to avoid.
00:54 This is not financial advice.
00:55 These are just our opinions,
00:57 and I've got no position in Carvana at the moment.