Carvana Stock (NYSE:CVNA)
On Thursday morning, shares of Carvana (NYSE:CVNA) dropped as high as 4.5 percent. The Carvana stock was down 1.9% at 2:01 p.m. ET.
While the downturn in the broader markets was undoubtedly a factor, the car-buying e-commerce site also had its trigger in the shape of lowered expectations by a Wall Street analyst.
What’s the Reason?
John Colantuoni, an analyst at Jefferies, lowered his price objective for Carvana stock from $43 to $23 while keeping a hold rating. The weakening macroeconomic climate triggered the analyst’s pessimistic forecast. It wasn’t only the online vehicle-selling platform that saw cut projections; U.S. internet-based companies as a whole were hit hard.
Colantuoni lowered his projections by an average of 5%, yet this still places his models below the average prediction of experts. Risk-reward analysis, in his opinion, is the best way for investors to determine which online stocks are worthwhile holding over the long run. He suggests putting one’s attention on businesses that have “competitive distinctiveness,” “exposure to attractive end-markets,” “levers to overcome lower demand,” and “strong” free cash flow.
Although Colantuoni considers Airbnb the most recession-resistant group, he does not recommend investing in Etsy since the company has already passed the “trough” in its fundamentals.
What Should You Do Now?
Aside from the bearish remarks, investors in Carvana stock have additional concerns. Inflation’s effects on customers are front and center, especially given the already waning demand in the used automobile market.
Last week, CarMax’s main competitor disclosed dismal financial results for the company’s most recent fiscal quarter (which concluded on August 31). Two months previously, Carvana (NYSE:CVNA) posted dismal results for the second quarter. Many buyers have put off purchasing used automobiles because of inflation at a 40-year high, high retail costs, and rising loan rates. This pattern is expected to continue until the economy recovers.
Due to the company’s financial situation, investors should wait until cash burn decreases and profitability increases before purchasing Carvana stock.
Featured Image- Megapixl @ Actionsports
Author Shariq Khan 
