Carvana (CVNA) plunges as analyst downgrades on bankruptcy risk
- Wall Street ends down after stunning jobs growth raises Fed questions
- Public Storage (PSA) offers to acquire Life Storage (LSI) in all-stock deal worth $11 billion
- Elon Musk wins 'funding secured' trial
- U.S. nonfarm payroll growth blows past forecasts in January, up 517k
- Analysts defend Apple (AAPL) as earnings miss drags shares lower
Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.
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
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Merck (MRK) drops as full-year forecast misses consensus
- Daicel Corporation (4202:JP) (DACHF) PT Lowered to JPY980 at Nomura/Instinet
- Alphabet (GOOGL) stock falls as ad business disappoints, analysts remain positive
Create E-mail Alert Related CategoriesAnalyst Comments, Downgrades, Hot Comments, Hot Downgrades, Hot List, Rumors
Related EntitiesPacific Investment Management Company, LLC (PIMCO), Pre Market Movers
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!