Sign InSummary
Carvana Co experienced significant growth in their stock price on July 10, 2023, driven by impressive EV sales and controlled costs, but negative earnings per share and overbought indicators suggest caution is needed before investing, with existing investors advised to hold and potential new investors advised to wait for clearer signals before buying.
Fundamental Analysis
Carvana Co (Ticker: CVNA), an online used car dealer, showed considerable growth in their last closing, reaching $34.27 on July 10, 2023. This represented an increase of $4.82 (or 16.37%), marking a notable day for the company's stock.
The company's recent performance was influenced significantly by impressive EV sales data and controlled costs, which has partially fueled the current rally. Moreover, there's evidence of a potential short squeeze, indicated by the wave of purchases intended to cover existing short positions. This type of activity tends to temporarily boost stock prices.
Flipping to some of CVNA’s fundamentals, it is pertinent to note that they have a negative earnings per share (EPS) at $-4.18. This negative EPS indicates that the company has been making losses, which could be a noteworthy concern for investors. In terms of its Price to Earnings (PE) ratio, it is at -8.19, reinforcing the fact that the company has been unable to generate profits.
Considering the company's market capitalization, CVNA stands around a decent $6.08 billion. The average trading volume is at nearly 24.93 million, with an outstanding share volume of 177.60 million.
Technical Analysis
On the technical analysis front, Carvana's Relative Strength Index (RSI14) stands at 65. This is in the higher range, suggesting that the stock is nearing overbought territory.
With a 50-day moving average at $16.47 and a 200-day moving average at $12.01, CVNA's current price level indicates a positive uptrend. This uptrend is further corroborated by the moving average convergence divergence (MACD) value of 4.01, which highlights a bullish market sentiment for this period.
The short-term price range has varied between a low of $28.13 and a high of $34.59. However, the yearly price fluctuates from an extreme low of $3.55 to an extreme high of $58.05.
CVNA’s discounted cash flow (DCF), which is a valuation method used to estimate the attractiveness of an investment opportunity, is higher than the last closing price at $38.57.
The high and low target estimates for CVNA are $470 and $5 respectively which are quite spread out, indicating analysts’ differing opinions about this stock.
Outlook and Recommendation
The consolidated exponential rise in EV sales and cost controls posit a favorable momentum for Carvana. But, with negative earnings per share and overbought indicators, it indicates caution is much needed before making any financial commitments.
For the next trading day (July 11, 2023), the stock price may get a slight boost from the current momentum and market sentiment, potentially reaching around the DCF level of $38.57. However, in the backdrop of the possibility of short squeeze and over-valued RSI, this surge might be short-lived and some correction could be expected in the week to follow.
Taking into account the current fundamental and technical indicators, and the looming earnings announcement on August 3rd, 2023, the existing investors could be advised to HOLD the stock for the short-term while potential new investors might want to wait for clearer signals before making a buy decision. However, any decisions regarding buying, selling, or holding CVNA should be made in light of individual financial goals and risk tolerance.
