Accordingly, the stock probably isn't a good fit unless you're on the hunt for speculative rebound plays. The company can cut operating costs to reduce overall net losses, but it has a difficult path to profitability, and there are pressing debt issues that will have to be overcome in the near term. Is now the time to buy Carvana stock?Ĭarvana faces a tough sales outlook, pressured gross margins, and liquidity issues. For investors, that means potential for superior returns to compensate for the elevated risk in buying Carvana stock. That could mean excellent upside in the long run if it can effectively deal with its current challenges. The company offers car buyers and sellers an improved experience over legacy dealerships with transparent pricing, e-commerce options, and better service. But management recognized the changing car-buying environment and made aggressive moves to adjust costs, inventory, and spending accordingly. Shares are down 98% off their highs in 2021. That said, its challenges are likely already more than priced into the stock. Now that new-car production has increased, and consumer demand for cars overall has decreased, Carvana is stuck with more inventory than it would like. Unfortunately, Carvana buys and sells used cars, and as the prices of vehicles increased, it paid more for inventory. That was great news for a used car business, and sales increased from $5.6 billion to $12.8 billion between 20. The company thrived at the onset of the pandemic when new-car production was constrained by supply chain disruption. Parkev Tatevosian: Admittedly, Carvana has plenty of challenges to overcome in the near term. The bull case: Carvana stock is risky but has a massive upside potential The company will likely either need to take on more debt and restructure, or return to the well with new rounds of substantially dilutive share offerings. Carvana is burning cash, sales could be stuck in reverse for the foreseeable future, and it has debt repayments coming due in the next two years.
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