Sign InCarvana Co. (CVNA) Shows Potential for Growth Despite Negative Earnings: Hold Recommendation
Summary
On August 4, 2023, Carvana Co.'s stock (CVNA) experienced a significant drop, but has otherwise shown substantial growth and technical indicators suggest potential for further growth, despite negative earnings per share and concerns about debt restructuring and shareholder dilution, leading to a recommendation to hold the stock for now.
Technical Analysis
On the technical front, Carvana Co. (CVNA) ended the last trading day at 45.44 USD on August 04, 2023, recording a change of -6.35, a -12.26% drop from its previous close. The stock price fluctuated between a low of 45.15 USD and a high of 53.11 USD during the trading day. The stock has experienced a substantial increase in recent times, boosted to its year high of 58.05 USD, up significantly from a year low of 3.55 USD.
The company's market cap stood at 8.07 billion USD. Trading volume for the last session was 15.20 million, less than the average volume of 32.64 million shares the firm generally sees on a daily basis.
CVNA's Relative Strength Index (RSI14) stands at 58, indicating a neutral trading behaviour, whereas its Moving Average Convergence Divergence (MACD) indicating a bullish market upwards of 8.31 on a 3-month scale. The 50-day moving average of 29.27 and a 200-day moving average of 13.98 reflect substantial upward movement in recent months.
Fundamental Analysis
CVNA has reported negative earnings per share (EPS) of -4.18 and possesses a Price/Earnings ratio of -10.86. It has 177.60 million outstanding shares with the next trading day falling on August 07, 2023.
The discounted cash flow (DCF) analysis, often used by investors for evaluating the cash that a business is likely to generate in the future, is currently at around 49.74.
Recent news indicates that Carvana is among the companies targeted for a potential short squeeze, has been taking steps to improve its financial situation through debt restructuring, and is potentially diluting shareholders to raise money. The company has also expanded its services offering same-day delivery in select markets.
Based on analysts' predictions, the consensus target price for the stock is around 113.21 USD, with the lower and higher end of the prediction scale at 5 and 470 USD respectively, indicating both high bullish and bearish predictions.
Earnings Analysis
The company's next earnings announcement is scheduled for Nov 01, 2023. Investors will be keen to see if the company can continue on its upward trajectory in the coming months by implementing new strategies and maneuvers.
Recommendation
Given the recent significant upward momentum in CVNA's price along with its technical indicators suggesting it is neither oversold or overbought, there could be more room for growth in this stock, despite a negative earnings per share.
However, the debt restructuring and reported shareholder dilution raise concerns. Considering this in view of the significant discord in target prices among analysts, the stock carries substantial uncertainty.
Consequently, in light of the given factors, the recommendation for Carvana Co. (CVNA) at this time would be to Hold. Potential investors should monitor the ongoing situation and changes prior to making any purchase decision. Current holders may want to await further clarity on the company's debt situation and ongoing performance before making any sell decisions.
