Bank of America remains somewhat skeptical about Carvana stock (NYSE:CVNA), as its impressive rally didn’t sway equity analyst Nat Schindler, who decided to move from a previous Neutral rating to No Rating on the stock. He admits the positive forecast change is a good sign but strongly advises a cautious approach due to the stock’s unpredictable path. Furthermore, he underlines the need for Carvana to address its hefty debt issue, a task that would require far-reaching solutions.
Schindler also drew attention to Carvana’s financial health, warning, “Without a lifeline of cash, Carvana may very well deplete its accessible and affordable cash reserves by 2023’s close.” He did not rule out the chance of a cash injection but conceded that its timing and occurrence were unpredictable. Adding to this mix is the high short interest. This cocktail of factors, in Schindler’s perspective, will result in a binary outcome for the stock. The stock’s trading patterns, he believes, reflect more of the company’s balance sheet and liquidity than its actual core business performance.
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Overall, Wall Street analysts have a consensus price target of $13.64 on CVNA stock, implying 46.88% downside potential, as indicated by the graphic above.