Carvana Co CVNA has been in focus this month, having joined companies announcing layoffs, amid a decline in used car prices.
While the company has been “struggling to turn profitable,” it also suffers a quick cash burn with an annual interest expense of around $600 million, according to BofA Securities.
The Carvana Analyst: Nat Schindler downgraded the rating for Carvana from Buy to Neutral, while slashing the price target from $43 to $10.
The Carvana Thesis: The company now has $477 million in cash and inventory of $2.6 billion, which is significantly short of its long-term notes payable of $6.6 billion, Schindler said in the downgrade note.
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“We now believe that without a cash infusion, Carvana is likely to run out of cash by the end of 2023,” the analyst wrote. “There is no indication yet of a potential cash infusion…and it is impossible to predict if and when that would occur,” he added.
Carvana faces “macro headwinds to both the supply and demand side” as well as company-specific issues, Schindler further stated.
CVNA Price Action: Shares of Carvana were down 5.39% to $6.94 at the time of publication on Wednesday.
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