It may not be a great day in the stock market, but it’s an outright horrendous day for Carvana (NYSE:CVNA) stock. Shares of CVNA stock are down roughly 17% and hitting new session lows late in the day.
What’s behind the drop?
Today, analysts at Stifel Nicolaus lowered their CVNA price target to $34, down from $48 per share. They also maintained a hold rating. The crux of the matter centers on cash flow. According to the analysts’ Cash Burn Rate Tracker, Carvana is classified as a Tier 3 firm. That implies it will need additional funding and/or a restructure to manage its current finances.
It doesn’t help that the used vehicle market is trending lower right now. According to Cox Automotive, used vehicle volume had decreased 8% year-over-year (YOY) through the first quarter. But those trends have since worsened, down 19% YOY through May. Stfifel had the following to say:
“This backdrop may partially offset the impact of the company’s cost-cutting measures and limit its ability to bridge to sustainable FCF without requiring additional capital.”
How Does CVNA Stock Stack Up Around Wall Street?
Stifel now has one of the lowest price targets for CVNA stock on the Street. Recent analyst actions have been in the same ballpark. In June, Wells Fargo assigned a $35 price target for shares. Soon after, Stephens also assigned a $38 price target to Carvana stock.
That in mind, perhaps we will see more re-ratings from analysts. Still, there have also been several positive ratings 0ver the last several weeks. Bank of America recently gave CVNA a $80 price target. Meanwhile, Wedbush gave it a $90 target and Baird gave it a $65 target.
It has been a painful Tuesday for CVNA stock, which has slowly bled into this afternoon. That said, shares still remain 26% above the 52-week low of $19.80 per share. For what it’s worth, that low undercuts Carvana’s Covid-19 low from March 2020.
On the date of publication, Bret Kenwell did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
