Sign InCarvana Co. (CVNA) Faces Shareholder Concerns Over Rising Debt Levels
Summary
Carvana Co. (CVNA) experienced a decline in share price on July 21, 2023, due to concerns over rising debt levels despite its strong upward price momentum, leading to a recommendation to hold for current owners and sell for new investors.
Carvana Co. (CVNA) - Fundamental Analysis
Carvana Co. (CVNA) closed at $45.62 on July 21, 2023, experiencing a 2.38% decline, reflecting shareholders' concerns over the firm's rising debt levels. The company's aggressive growth strategy led to a monumental increase in its long-term debt that rose to $6.57 billion by 2022. The high debt levels introduced certain financial uncertainties, engendering skeptical market sentiment.
Carvana exhibited significant volatility within the session with a low and high price of $43.64 and $49.25, respectively. A year-to-date view shows the price touched a low of $3.55 and a high of $58.05. The company's market capitalization stands at $8.10 billion, with approximately 177.60 million shares outstanding demonstrating significant circulation in the market.
In terms of volume, Carvana has seen an exchange of 29.45 million shares, just shy of the average volume of 31.07 million shares, indicating regular market participation.
The firm's EPS stands at -$4.18, representing a negative profitability perspective. This is further confirmed by the negative P/E ratio of -10.9. However, these indicators may reflect an investment in growth, mirrored in the company’s significant debt.
Despite the negative profitability indicators, the company's share price continues to exceed both its 50-day and 200-day moving averages standing at $22.33 and $12.66 respectively, indicative of a strong upward price momentum, even though doubts persist regarding the company's capability to service its debts.
Carvana Co. (CVNA) - Technical Analysis
From the technical perspective, indicators such as the Relative Strength Index (RSI14) and Moving Average Convergence Divergence (MACD) provide insight into the stock's momentum. With an RSI of 71, CVNA is inching towards the overbought territory, indicating a potential for a price correction.
The 3-month MACD of 4.88 suggests bullish momentum in the marketplace. Traders often regard the MACD as an indicator for possible bullish or bearish reversals.
Carvana (CVNA) – Price Prediction and Evaluation
Given the available data and recent news, CVNA's operationally strong Q2 results and a favorable deal with noteholders have bolstered its stock value. However, skepticism remains due to the firm's towering debt coupled with the recent stock downgrade by some analysts.
Factoring in these conditions, Carvana's stock price might see some declines on July 24, 2023. However, in the upcoming week, the stock’s performance may show fluctuations depending on the company’s ability to manage its debt while continuing its operational performance.
The stock remains a risk-reward play. Predictive volatility in stock performance along with the still prevailing financial uncertainty owing to the company's debt situation, compels a recommendation to Hold for current owners. However, for new investors, the stock leans towards Sell due to the several financial concerns looming over the company.
