By Sam Boughedda
Needham & Company analysts downgraded Carvana Co. (NYSE:CVNA) to Hold from Buy, removing the firm's price target on the stock in a note to clients on Friday.
It is the latest downgrade of the struggling online used car dealer, with serious concerns about its current financial situation and future.
Analysts told investors on Friday that given Bloomberg reporting that Carvana creditors are mobilizing and unifying ahead of a potential bankruptcy filing, the firm struggles to see a "near-term path forward that would get investors excited to own the stock until they see improved execution."
"It's possible the market is implying a near-term bankruptcy filing given the 25% decline in CVNA shares over the past two days (versus a 1% increase in the S&P 500) despite the company's potential sources of cash (vehicle inventory and unpledged real estate). Nevertheless, CVNA's 2nd round of layoffs lowers our confidence in management's turnaround plans, and we don't yet see a long-term solution," wrote the analysts.
"While we think CVNA has a potential strategic path, we're not convinced it will prove successful over the long term. CVNA could refocus solely on older cohort markets (Atlanta, the upper Midwest) where its market shares are highest and where its unit economics are most favorable given higher unit volumes and the company's highest efficiency IRCs," they added.