Carvana Co. (NYSE: CVNA), a company that was once on the brink of bankruptcy, is now expected to generate more than $1 billion in EBITDA adjusted this year.
The shares of this online retailer for used cars are up 20% today after exceeding Street expectations in terms of profit and revenue during its third fiscal quarter.
Victoria Greene, of G Squared Private Wealth, says that Carvana “is still a sell” for her.
Greene is a dovish investor in Carvana shares.
Carvana’s gross profit per car (a closely watched metric), increased by a much higher than expected 25% year over year to $7,427 during the third quarter.
Victoria Green, however, recommends that CVNA be sold at a profit as the stock’s gains of over 400% for the year to date suggest that this rally is a little ahead of its time. She cited the rising competition on CNBC’s “Power Lunch” as a reason for considering selling Carvana shares.
What is the moat of their technology? As everyone else moves more towards DTC and as other technology advances, it’s hard to say if they will be able to maintain this momentum.
According to a letter sent on Thursday, the online retailer of used cars improved their inventory during the third quarter. However, they remain below the target levels for available inventory.
Carvana does not currently pay dividends. It is therefore not attractive to those who are interested in passive income from the equity market.
CVNA could suffer from higher cost of living
Ally Financial warned in September that credit issues in retail automotive could worsen in the months to come.
The warning could be an additional reason for you to move away from Carvana stocks, as Ally is CVNA’s largest buyer of receivables.
Ally Financial has even signed an agreement under which the New York-listed firm will sell $4,000 billion in finance receivables to it between January 2024 and 2025.
Carvana has a very successful turnaround, but its balance sheet is not the best.
At the time of writing, the company is based in Tempe, Arizona and has a long-term loan of $5.43 billion.
Wall Street rates Carvana’s stock as “hold only” at the moment.
After today’s strong earnings report, the average price goal for the online retailer of used cars is $228. However, it has already risen to $255 following this quarter.
If you invested in CVNA at the beginning of 2023 you would have over $50,000 today.
The post Carvana Stock: It’s Time to Move To the Sidelines might be updated as new information unfolds
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