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Carvana (CVNA) plunges as analyst downgrades on bankruptcy risk

December 7, 2022 9:08 AM EST
Get Alerts CVNA Hot Sheet
Price: $14.45 +1.40%

Rating Summary:
    4 Buy, 32 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 10 | Down: 32 | New: 9
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Shares of Carvana Co. (NYSE: CVNA) fell 30% in pre-open trading Wednesday after Wedbush analyst Seth Basham downgraded the stock to Underperform, citing rising bankruptcy risk.

The downgrade and comments follow a Bloomberg report overnight that a group of 10 creditors, including Apollo and PIMCO, holding $4 billion of Carvana debt, signed a cooperation agreement to present a united front in restructuring negotiations.

Bashman also set a "Street Low" $1 price target on the stock, suggesting 85% downside to yesterday's closing price. Shares have already been down 97% year-to-date.

The analyst said the bondholder news combined with news that director of investor relations Mike Levin left and the fact that Carvana bonds are trading at 50 cents on the dollar "indicates a higher likelihood of debt restructuring that could leave the equity worthless in a bankruptcy scenario (pre-packaged or otherwise), or highly diluted in a best case."

The analyst said a restructuring would enable the company to reduce its $600 million annual interest expense burden and shed assets.

"... we now see a restructuring as a higher probability, leading us to lower our rating on CVNA shares from NEUTRAL to UNDERPERFORM and reduce our target price to $1 (from $9)," the analyst concludes.

By StreetInsider.com Staff



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