What's Going On With Carvana Stock?

Carvana Co CVNA shares are trading lower Thursday amid bearish analyst coverage from JPMorgan. 

What Happened: JPMorgan analyst Rajat Gupta downgraded Carvana from a Neutral rating to an Underweight rating and set a $10 price target, citing valuation concerns. 

"We believe valuation has once again disconnected materially from fundamentals," the JPMorgan analyst said in a note to clients.

The current valuation is baking in a stronger than anticipated return to growth and operational leverage in 2024 and beyond, Gupta said. 

The analyst firm also noted that it still believes Carvana should consider a debt/equity exchange of some form, adding that "funding outcomes could still dictate near-term direction of shares."

The downgrade comes after Carvana shares have rallied nearly 50% over the last month and more than 700% since the start of the year. The surge in shares was sparked by the company's better-than-expected financial results at the beginning of May. The company also laid out expectations for positive EBITDA in the second quarter.

Carvana then raised its second-quarter outlook in early June. The company expects adjusted EBITDA to come in above $50 million and total gross profit per unit to be above $6,000. 

Several analysts raised price targets following the announcement, which helped fuel a continued rally in shares. The stock has also been heavily shorted along the way, with 59.7% of the float currently sold short.

Carvana was among the most-searched tickers on Benzinga Pro in the first half of the year. 

See Also: Carvana Options Traders See Stock Surging Even More, After Shares Rise 739% Year-To-Date

CVNA Price Action: Carvana shares were down 6.61% at $36.32 at the time of publication, according to Benzinga Pro.

Photo: courtesy of Carvana.