Used car retailer Carvana (NYSE: CVNA) got hit by another downgrade on Friday even as the company’s losses narrowed in Q2 and it announced a debt restructuring agreement. Top-rated Piper Sandler analyst Alexander Potter downgraded the stock to a Hold from a Buy but raised the price target to $48 from $29. The analyst’s current price target implies an upside potential of 5.4% at current levels.
This downgrade follows another downgrade from RBC analyst Brad Erickson on Thursday.
Potter pointed out that a higher valuation for Carvana “would require changes to our long-term volume outlook. And while recent operational improvements (at low volumes) give us greater confidence in [the company’s] ability to reach consistent profitability, we don’t think they warrant a change to our long-term used vehicle market-share expectations.”
Carvana shares have surged by more than 15% in the past five days alone.
While the analyst approved of the car retailer’s debt restructuring, Potter had some concerns about the company’s Q2 earnings. Potter commented, “It remains to be seen whether [Carvana] can sustain cost discipline at higher volumes, and [s]everal fortuitous factors (some one-time in nature) converged” to raise the company’s gross profit per unit.
Analysts are sidelined about CVNA stock with a Hold consensus rating based on one Buy, 13 Holds, and three Sells.
