Carvana Could Rund Out of Cash By 2023, Says Analyst

Carvana (NYSE: CVNA) shares continued to plunge on Wednesday after the stock was once again downgraded on fears of a crash crunch.

Various analysts have downgraded the online second-hand car company in the last few weeks, with Baird, Cowen, Argus, and Oppenheimer cutting the stock.

The latest downgrade comes from BofA. Analyst Nat Schindler lowered the firm's rating on the stock to Neutral from Buy with a price target of $10, down from $43. The analyst cited concerns about Carvana's cash burn and liquidity as the reason for the downgrade. 

He told investors in a research note on Wednesday that the company has been struggling to turn profitable, and with $600 million in annual interest expense, it is burning through cash quickly.

Schindler added that there is “no indication yet of a potential cash infusion,” and without one, the company could run out of cash by the end of 2023. 

Baird last week downgraded Carvana to Neutral from Outperform, with analyst Colin Sebastian slashing the firm's price target on the stock to $7 from $30 per share. Sebastian told investors that the company is exposed to a pullback in discretionary “high ticket” purchases, and he has concerns over Carvana's ability to cut overhead costs and operating expenses as fast as needed.

Meanwhile, Cowen moved Carvana to Market Perform from Outperform last week with analyst John Blackledge setting a $10 price target on the struggling stock. Blackledge said industry and macro headwinds have hurt unit growth and the company's revenue trajectory, increasing the path to profitability despite cost-cutting measures.

Finally, Argus analyst Taylor Conrad downgraded Carvana to Sell from Hold in a note to clients last week. Conrad said the company's share price decline reflects its recent results and weak industry trends. The analyst added that as used car prices decline, she expects CVNA to struggle to make a profit on vehicles previously bought at high prices. Conrad explained that Carvana is also “highly leveraged,” and at its current price, it is “overvalued.”

Despite the downgrade, Carvana shares rose 5% on Wednesday after declining at the start of the session. However, its performance this year has been abysmal, and the stock has plummeted 96%.