Sign InCarvana's Strong Bullish Trend Supported by Positive Q2 Results and Operational Progress
Summary
Carvana Co.'s stock is expected to continue its upward momentum in the short term, supported by positive Q2 results and operational progress, but investors should exercise caution due to an impending overbought condition and the company's recent decision to dilute shareholders, which may impact the stock's value in the long run.
Technical Analysis
Carvana Co. (CVNA) closed at $51.79 on August 3, 2023, a slight decrease of 0.12% from the previous session. The day's trading range was between $49.40 and $53.31. The stock is notably trading significantly above its 50-day moving average of $28.47 and its 200-day moving average of $13.81, suggesting a strong bullish trend.
The volume of shares traded was 19.99 million, below the average volume of 32.59 million. The Relative Strength Index (RSI14) stands at 65, indicating that the asset is approaching overbought territory.
The Moving Average Convergence Divergence (MACD), a trend-following momentum indicator, stands at 8.50 for the past three months, which indicates upward momentum.
Fundamental Analysis
Carvana Co. has a market cap of about $9.20 billion and has 177.60 million shares outstanding. Despite the considerable growth in share price, the company's earnings per share (EPS) remains negative at -4.18. This results in a negative Price to Earnings (PE) ratio of -12.38.
The discounted cash flow (DCF) valuation, which factors in future cash flows, is at $56.09. This value is above the recent closing price, implying some level of undervaluation currently.
Future expectations, based on analyst targets, range greatly with a high of $470 and a low of $5, a consensus of $113.21, and a median of $73. This reveals a varying degree of uncertainty and potential bullish sentiment toward the stock's future direction.
Recent News and Developments
Recent news indicate a few significant developments. Firstly, Carvana's recent decision to dilute shareholders to raise money may imply potential risks for current shareholders. Secondly, Carvana's expansion to same-day delivery indicates a strategic move to improve customer experience and potentially boost sales. Thirdly, positive second-quarter results and improved financials due to debt restructuring show operational progress.
However, there are concerns of the debt restructuring being a temporary solution, which could affect the stock's long-term stability.
Stock Prediction and Evaluation
Based on an analysis of the given data, Carvana's stock is likely to continue its upward momentum, given its current trading significantly above both 50-day and 200-day moving averages. Coupled with news of operational improvements and positive Q2 results, the stock might experience a potential increase on the next trading day and the following week.
However, the incoming overbought condition indicated by an RSI of 65 advises caution, which may hint at a price correction shortly. Current shareholders should bear in mind the company's recent decision for dilution to raise funds, which could negatively impact the stock's value.
Considering all these factors, including negative EPS and PE position, it is advisable to hold the stock. Existing investors could continue to steer the bullish momentum while potential new investors should approach with caution and closely watch market developments and the stock's technical indicators. Always conduct your research or consult with a financial advisor before making investment decisions.
