Carvana (NYSE: CVNA) shares are down a further 5% premarket Monday after the stock was downgraded to Sell from Hold at Argus.
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Carvana shares have crashed this year, down 96% after starting the year at around $234 per share. In the last 12 months, the stock has declined 97%.
This morning, Argus analyst Taylor Conrad downgraded Carvana in a note to investors, stating the stock's sharp drop reflects the company's recent results and weak industry trends. The analyst also noted that as used car prices decline, she anticipates Carvana will struggle to profit from vehicles previously purchased at high prices. Conrad added that Carvana is also “highly leveraged” with a debt-to-capital ratio of 95%, while its current stock price means it is “overvalued.”
On Sunday, it was reported by The Wall Street Journal that used car dealer Carvana is rushing to conserve cash as its financing options and business deteriorates. They added that the company laid off around 1,500 people on Friday.
Elsewhere, the negative sentiment surrounding Carvana is shared by Oppenheimer, who downgraded Carvana to Perform from Outperform without a price target last week.
Analyst Brian Nagel said he remains optimistic about longer-term prospects for Carvana and the company's shares, but “significant nearer-term operational and financial risks” for Carvana have arisen and will likely cloud the investment story for the foreseeable future.