By Sam Boughedda
Shares of Carvana Co. (NYSE:CVNA) were upgraded to Overweight from Neutral with the price target cut to $73 from $98 by a Piper Sandler analyst on Monday.
In his note, the analyst acknowledged that used vehicle prices are falling, and rising rates present a risk. However, he explained that Carvana is "now 1/10th as valuable as it was 12 months ago, and after running a detailed sensitivity analysis, we think many realistic scenarios suggest that CVNA is grossly undervalued."
"Our DCF-based price target is moving from $98 to $73, but even this lower price target implies more than 100% upside potential, despite a WACC of nearly 17%," added the analyst.
He concluded that Carvana could "easily continue falling," but with "so much potential upside," they believe investors should consider owning at least some of Carvana shares.