Carvana cut to Sell at Argus amid falling used auto prices

Joe Raedle

Carvana Co. (NYSE:CVNA) stock slid 5.09% in premarket trading after Argus downgraded the stock to Sell on Monday.

The firm’s analysts advised that shares still have room to decline despite an already drastic drop in 2022. Shares of the Arizona-based online auto retailer have fallen over 97% in the past year.

“Even after shares are down sharply from their 52-week highs, reflecting both the company's recent results and weak industry trends,” the firm’s analysts said. “As used car prices fall, we believe that Carvana will struggle to make a profit on vehicles previously purchased at high prices. The company is also highly leveraged, with a debt/cap ratio of 95%.”

As such, the analysts said the shares are “overvalued at current prices”, making a Sell rating “now appropriate,” in their view. The sell-side consensus rating on shares remains a Hold, while SeekingAlpha’s Quant team retains a “Strong Sell” rating.