Carvana Has ‘Nowhere to Hide’ Says Analyst

After another 8% decline on Tuesday, Carvana (NYSE: CVNA) shares are down 98% this year, and Wedbush analyst Seth Basham said there is “nowhere to hide” for the online used car retailer.

The analyst told investors in a research note that following recent data points such as CarMax's third-quarter results last week and no fourth-quarter Carvana ABS deal, he has reduced estimates further below consensus for Carvana.

“It's only getting worse,” Basham declared. He pointed to CarMax painting a “bleak” near-term industry picture, highlighting the fact that many competitors are cutting prices sharply to reduce high-cost inventories in a falling price environment.

As a result, the analyst said that with used car price declines accelerating, there is “nowhere to hide.”

Basham explained that Carvana entered the quarter with 87 days of inventory, and his web-scraped data indicates the number has unfavorably increased as sales have struggled further and inventory units for sale have only slightly declined.

Basham now sees 85k retail unit sales in Q4, down from 94k previously and below the consensus of 96k. His estimate would represent a 25% year-over-year decline, which would fall well short of the industry's high-single-digit decline and CarMax's 21% decline.

The analyst writes that while bankruptcy is not likely imminent, lagging results and liquidity have resulted in the firm's Underperform rating on Carvana's stock and price target of $1 per share being maintained.

Premarket Wednesday, the stock is up 1.3% at the time of writing.