Carvana Co (NYSE:CVNA) shares are trading lower Thursday amid bearish analyst coverage from JPMorgan.
What Happened: JPMorgan analyst Rajat Gupta downgraded Carvana from a Neutral rating to an Underweight rating and set a $10 price target, citing valuation concerns.
“We believe valuation has once again disconnected materially from fundamentals,” the JPMorgan analyst said in a note to clients.
The current valuation is baking in a stronger than anticipated return to growth and operational leverage in 2024 and beyond, Gupta said.
The analyst firm also noted that it still believes Carvana should consider a debt/equity exchange of some form, adding that “funding outcomes could still dictate near-term direction of shares.”
The downgrade comes after Carvana shares have rallied nearly 50% over the last month and more than 700% since the start of the year. The surge in shares was sparked by the company’s better-than-expected financial results at the beginning of May. The company also laid out expectations for positive EBITDA in the second quarter.
Carvana then raised its second-quarter outlook in early June. The company expects adjusted EBITDA to come in above $50 million and total gross profit per unit to be above $6,000.
Several analysts raised price targets following the announcement, which helped fuel a continued rally in shares. The stock has also been heavily shorted along the way, with 59.7% of the float currently sold short.
Carvana was among the most-searched tickers on Benzinga Pro in the first half of the year.
See Also: Carvana Options Traders See Stock Surging Even More, After Shares Rise 739% Year-To-Date
CVNA Price Action: Carvana shares were down 6.61% at $36.32 at the time of publication, according to Benzinga Pro.
Photo: courtesy of Carvana.
