Sign InCarvana's Stock Surges 40%: Potential Upside Despite Overbought Conditions
Summary
Carvana's stock (CVNA) closed at $55.80 on July 19, 2023, experiencing significant growth and indicating a potential upward trend, but overbought conditions and negative earnings suggest the need to monitor closely.
Introduction
Carvana Co. trades under the ticker CVNA on the New York Stock Exchange. As an innovative online used car dealer, Carvana offers its customers a unique selling model that reduces much of the complications associated with traditional auto sales.
Technical Analysis
On July 19, 2023, CVNA closed at $55.80, reflecting a significant growth of 40.20% or $16.00 from its previous position. Its trading range for the day was from a low of $47.10 to a high of $56.92. Impressively, the stock's one-year range is from a low of $3.55 to a high of $58.05, denoting an enormous potential for volatility.
The trading volume on July 19 reached 115.52 million shares, notably higher than the average volume of 28.56 million shares. This kind of drastic increase in volume could indicate high investor interest and potential continuation of price movement.
CVNA's RSI14 is currently at 84, signaling that the stock may be overbought. This could indicate a potential cooling-off period or even a correction around the corner. Furthermore, the stock's MACD (3-month) is at 3.96, further pointing to bullish momentum but suggesting possible overbuying.
With respect to moving averages, the stock's 50-day moving average is $20.68, while the 200-day moving average stands at $12.35. Currently, the stock price is significantly above both these averages, reflecting a strong upward trend.
Fundamental Analysis
Carvana's market cap is currently around $9.91 billion. The company has about 177.6 million shares outstanding. However, the earnings per share (EPS) stand at -$4.184 with a negative price-to-earnings ratio of -13.34, indicating the firm is not currently generating positive earnings.
A vital component of the fundamental analysis is the Discounted Cash Flow (DCF). Carvana's DCF is $60.10, giving it a fair value higher than its current price and suggesting that the stock may be undervalued.
Analysts' consensus target for the CVNA stock is $111.26 with a high and low estimate of $470 and $5, respectively. The median target is $73, all substantially higher than the current price.
Recent News
Recent news indicates that Carvana's stock jump was due to a resurgence of 'risk appetite', and that customers are resonating with Carvana's unique business model. Importantly, the company just announced a debt reduction deal, prompting a rally in their stock price, while their CEO, Ernie Garcia, believes there is “more comeback in us."
Conclusion & Prediction
Based on the analysis, CVNA's price could continue its upward trend on the next trading day, July 20, 2023, as investor interest remains above average following recent positive news and assertions from the CEO.
However, for the upcoming week, there might be a cooling-off period or minor correction, given the indications from the RSI14 and the MACD.
Finally, the evaluation of CVNA stock is a HOLD. While the recent performance and analysts' targets suggest substantial potential upside, the overbought conditions and negative earnings need to be monitored closely.
