Shares of Carvana (NYSE:CVNA) have stunned their doubters, and Friday’s 3.5% decline is doing very little to make them feel better. The same can be said about the 16% decline in CVNA stock on Thursday.
It makes an investor wonder: What stock can fall about 20% in two days and not please its doubters?
The one that’s still up 20% for the week and will notch its fourth straight weekly gain on Friday afternoon. In that span, Carvana stock is also up more than 100%.
From the May 1 low, shares are up 570% as the stock works on its 11th weekly gain in the last 12 weeks. In nine of those 11 weekly wins, the gains eclipsed 10%. In six of them, the gains were in excess of 20% (and CVNA stock will try to make that seven weeks today).
Perhaps my favorite stat for Carvana’s stock run is this: Despite shares rallying 1,510% from the December 2022 low to this week highs, shares still aren’t at new 52-week highs (which sit at $58.05 from August).
All of this from a name that was expected to go bankrupt. In fact, at one point this year, the biggest surprise for Carvana seemed to be that it didn’t go belly-up before Bed Bath & Beyond (OTCMKTS:BBBYQ).
The company continues to prove its naysayers wrong.
A bulk of this week’s gains came after the company’s better-than-expected second-quarter results. A deal to restructure its debt also gave bulls a wave of confidence. But is that confidence misplaced?
Piper Sandler Downgrades CVNA Stock
For what it’s worth, Piper Sandler has not been a stubborn bear on CVNA stock. In fact, the analysts are only downgrading it from “outperform” to “neutral.”
After the surge in the stock price, “the firm believes that chasing the stock higher would necessitate an upward revision to CVNA’s long-term used vehicle market share expectations, which it does not believe recent results substantiate.”
Analyst Alex Potter added, “We upgraded CVNA last September on the basis the company was trading at a significant discount to intrinsic value due to bankruptcy risk — which we thought was unlikely. Now that the bankruptcy scare has abated, and the stock has risen to $47, we believe CVNA is approaching a fair valuation.”
Separately, S&P Global Ratings also lowered its rating on Carvana.
That’s as the firm cut its credit rating to CC from CCC. “The ratings agency said it views the proposed transaction as distressed and said it would be tantamount to default if completed because lenders will receive less than originally promised.”
Even if shares rallied 500% from this week’s high, it still wouldn’t hit the 2021 all-time high. That said, it’s still up more than 500% from the May 1 low and at this week’s high, was up 750%. After such a move, many bulls are feeling emboldened, but it has at least some bulls thinking about taking profits.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
