Online used car company Carvana Co
What Happened: Kerrisdale Capital is out with a short report on Carvana.
"We're short $CVNA post the 30%+ spike last Friday," Kerrisdale tweeted Monday. "Valuation was stretched before, now at 42x '24E EV/EVITDA, it's plain ridiculous."
Kerrisdale said Carvana shares are "trading like it's an AI darling." Kerrisdale also said Carvana can't be a "one-trick pony on profits forever."
"Achieving rapid growth while maintaining/improving upon its margin gains - enough to justify its nosebleed valuation - will be impossible in our opinion."
Kerrisdale said there is a "muted growth outlook" for Carvana and no sign of improvement in unit economics.
"With the bulk of gains in unit economics now in the rear-view mirror and uninspiring rev growth ahead, the mkt should finally awaken to the fact that $CVNA is not a disruptive tech company, but just another auto dealer with similar margins and growth prospects."
Kerrisdale said it is "time to hit the brakes" on Carvana stock, which it calls a "poorly capitalized, growth-challenged auto retailer now valued at an absurd $19 billion." The gain in share price after earnings is sized up in the short report.
"The paint will eventually peel off this momo-fueled stock," Kerrisdale added (momo is shorthand for momentum).
Kerrisdale said shares of Carvana should trade at closer to $16.
Benzinga has contacted Carvana for comment on the short report.
Why It's Important: Carvana reported fourth-quarter revenue of $2.424 billion, which missed a Street consensus estimate of $2.528 billion. The company's loss of $1 per share also missed a Street consensus estimate of a loss of 88 cents per share.
Management called 2023 an "exceptional year for Carvana."
"Our deliberate focus on efficiency and profitability drove fundamental business improvements that not only led to our best-ever financial results but also increased customer NPS throughout the year," Carvana CEO Ernie Garcia said.
The company said it expects first quarter retail units sold to be up year-over-year and adjusted EBITDA to be above $100 million.
"Carvana is stronger than ever. We are beginning to demonstrate the differentiated profitability, efficiency and customer experience benefits our vertically integrated approach, and have a clear path toward our goals of becoming the largest and most profitable automotive retailer," Garcia said.
Here's a look at recent analyst activity on Carvana:
- Morgan Stanley: Underweight rating, raise price target from $32 to $45
- JMP Securities: Market Outperform rating, raise price target from $60 to $80
- RBC Capital: Underperform rating, raise price target from $24 to $45
- Wedbush: Neutral rating, raise price target from $50 to $60
- William Blair: Upgrade from Market Perform to Outperform, no price target
- Raymond James: Upgrade from Underperform to Market Perform, no price target
