Carvana Co. shares were set to fall again Friday, after a Thursday rally that followed Wednesday’s record declines, as analysts highlighted the challenging path ahead for the used-car retailer. Needham’s Chief Pierce downgraded Carvana’s stock
to hold from buy in a Friday note to clients titled: “Confidence is Low on the Path Forward.” In doing so, he removed his prior $20 price target on the stock, which closed Thursday just shy of $5.
Shares of Carvana were off more than 5% in premarket trading Friday. “Given Bloomberg reporting that CVNA creditors are mobilizing and unifying ahead of a potential bankruptcy filing we struggle to see a near term path forward that would get investors excited to own the stock until they see improved execution,” Pierce wrote in a note to clients. See also: Carvana stock tumbles 43%, books worst day on record as bankruptcy fears rev up He said that the market may be “implying a near-term bankruptcy filing” even though Carvana has “potential sources of cash” in its vehicle inventories and unpledged real estate. Whether execution matters very much these days seems to be a topic of debate. Jefferies analyst John Colantuoni, who halved his price target to $5 in a Thursday afternoon note to clients, wrote that he thought “the restructuring process will be the primary determinant of the stock price, with fundamentals as a distant secondary factor.” The broader industry backdrop is not treating Carvana too kindly either. “November auto data underscored continued weakness in used car demand, signs of stabilization in wholesale prices / conversion, and continued improvements in new car inventory,” Colantuoni offered. He cut his price target on shares of Vroom Inc.
to $1.10 from $1.30, noting that a restructuring for Carvana “could signal a further deterioration in the operating environment for used auto e-commerce.” It’s been a tough year f …