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Why One Analyst Says Carvana (CVNA) Stock Is ‘Grossly Undervalued’

  • A Piper Sandler analyst issued a bullish opinion on Carvana (CVNA) stock, though he also lowered his price target.
  • The analyst said the shares are “grossly undervalued” despite declining used-car prices.
  • CVNA stock spiked 13% early in today’s trading session.
CVNA stock - Why One Analyst Says Carvana (CVNA) Stock Is ‘Grossly Undervalued’

Source: Jonathan Weiss / Shutterstock.com

Carvana (NYSE:CVNA) just received an upgrade from Piper Sandler analyst Alexander Potter. At the same time, Potter reduced his price target on CVNA stock. Nevertheless, the analyst’s optimism seems to be spilling over into the market as investors are buying up Carvana shares today.

Carvana is an e-commerce platform for buying and selling used cars in the U.S. Potter views Carvana as a “simple business” even though the company acquired physical vehicle auction company ADESA.

Make no mistake about it: Potter is fully aware of Carvana’s headwinds. The analyst acknowledged, “used vehicle prices are falling,” “rising interest rates are a risk,” and “bankruptcy is a real possibility” for Carvana.

Despite these concerns, the Piper Sandler analyst upgraded Carvana shares from “neutral” to “overweight,” which is similar to “buy.” Potter even went so far as to claim that the shares are “grossly undervalued” and that many of Carvana’s possible outcomes “imply substantial upside.”

What’s Happening With CVNA Stock?

CVNA stock has declined substantially from its early January share price of more than $200. Today, however, the shares were up 13% by 10:30 a.m. Eastern, and broke above the $40 level.

This took place even though Potter reduced his price target on Carvana shares from $98 to $73. Perhaps traders recognized that even the reduced price target implies significant upside for the stock.

This isn’t to suggest that Potter wants investors to go all-in on Carvana shares. The analyst seemed to recommend a moderate position size. He stated, “CVNA could easily continue falling, but with so much potential upside, we think investors should consider owning at least some CVNA.”

According to Potter’s estimate, Carvana’s sales volume should reach 3.3 million units in 2035. This, if it happens, would account for roughly 8% of the U.S. used-car market.

That’s an ambitious projection, but today’s traders seem to be on board with Potter’s optimistic stance on Carvana. The company and its investors haven’t had a great 2022 so far, but today just might be the day that Carvana finally shifts into overdrive.

On the date of publication, David Moadel did not have (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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-one-analyst-says-carvana-cvna-stock-is-grossly-undervalued/.

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