Sign InCarvana Corp. Displays Positive Momentum with Potential Growth Strategies, But Lack of Profitability Raises Concerns
Summary
Carvana Corp. shows signs of positive momentum and potential growth, but its meme stock status and lack of profitability should be taken into account; short-term traders should hold the stock for daily volatility, while long-term investors should cautiously buy considering the weak fundamentals as a potential risk. (September 2023)
Technical Analysis
Carvana Corp. (CVNA) closed at $47.5 on September 19, 2023, with a decline of -$4.45 or -8.57% from its previous close. The trading volume for the day was 13.36 million shares, which is below the average trading volume of 20.02 million shares. This shows that selling pressure was not as high as it could've been. The stock's price moved between $46.01 and $53.07 throughout the day.
Carvana's current price is slightly above its 50-day moving average of $44.75, and significantly above its 200-day moving average of $19.41. Both demonstrate an overall positive trend. The relative strength Index (RSI14) is currently at 50, which is an equilibrium point. It suggests that neither buyers nor sellers currently dominate the market.
The Moving Average Convergence-Divergence indicator (3-month MACD) stands at 4.20, which also indicates a bullish spectrum. The average true range (ATR) which gauges the volatility stands at 9.17, indicating significant fluctuations in the day-to-day price movement.
The company's support level is $46.73, which is very near to the current price; providing a reasonable stop-loss at $45.125. The proximate resistance level is at $51.85. These figures provide a preview of the potential range in which the stock could trade.
Fundamental Analysis
Looking at the fundamentals, it's seen that Carvana has a market capitalization of $8.44 billion and has 177.60 million shares outstanding. The company's current earnings per share (EPS) stand at -$4.18, making the Price to Earnings ratio (PE) negative at -11.35, indicating that the company is not currently profitable.
The next earnings announcement is due on November 1, 2023. The stock is considered a meme stock with plenty of interest and potential volatility ahead. The discounted cash flow (DCF) stands at $51.80, which is higher than the current price, suggesting the stock could be undervalued.
Strong consensus from analysts suggests a buying perspective with 11 analysts recommending a buy, 10 holding, and only one suggesting a sell. The target consensus figure is $113.21 while the lower and high targets are $5 and $470 respectively, showing a wide disagreement among projections.
News Consideration
Recent news has characterized Carvana as an attractive momentum stock, indicating a potential growth outcome. Positive sentiments surrounding the company suggest that investors could consider buying the dip. However, news also suggests that Carvana has become a meme stock, indicating possible future volatility.
Prediction and Recommendation
Carvana is expected to open around its last close of $47.5 on September 20, 2023. Depending upon market conditions and overall momentum in the stock market, Carvana might trade between the support and resistance levels of $46.73 and $51.85 for the week commencing September 20, 2023.
Considering the overall analysis from both the technical and fundamental viewpoints, Carvana's stock seems to display positive momentum and has potential growth strategies that could attract investors. However, its status as a meme stock could bring volatility, and its lack of profitability is a concern.
Despite the potential volatility, the positivity surrounding potential growth makes Carvana a "Hold" for short-term traders, who can likely profit from the daily volatility. For long-term investors, it is recommended as a "Buy" with caution, considering that its fundamentals still remain weak and could emerge as a risk element in the long run.
