Here is Why Carvana (CVNA) Stock Collapse

CVNA Carvana

Carvana (CVNA) stock crash continues as the largest creditors are ready to sign a deal so can act together in negotiations for the next three months. Pacific Investment Management and Apollo Global Management hold almost $4 billion of Carvana’s (CVNA) unsecured debt, which is 70% of the total debt outstanding.

Meanwhile CVNA stock received two downgrades today. Wedbush Downgraded Carvana (CVNA) from Neutral to Underperform and cut the price target from $9 to $1 as the bankruptcy risk is rising. William Blair downgraded Carvana from Outperform to Mkt Perform.

On November 18 the company announced that will lay off 1,500 employees, amid a dismal economic environment that the company failed to predict. The news came as the stock is already down 96% in 2022.

Ernie Garcia the CEO of Carvana in an email said “Today is a hard day,” and the company need to make some hard choices. The high-interest rates environment has pushed higher the borrowing cost of used car sales. The company will fire almost 8% of its employees about 1,500 people. Tech and corporate departments will be the most affected by the layoffs.

The third quarter earnings report mirror the weak business environment the high inflation and the fear of a recession.

Carvana announced revenue of $3.386 billion, 2.7% lower than the Q3 of the previous year. The analyst’s expectations were for revenue of $3.71 billion.

Carvana reported a loss of $2.67 per share well below Wall Street expectations for a loss of $1.94 per share. In the third quarter of 2021, CVNA reported a loss of $0.38.

Gross profit dropped 31% to $359 million.

Gross profit per unit dropped to $3,500.

Retail units sold dropped 8.4% to 102,570.

Expenses increased by 20% to $656 million.

After the announcement of the Q3 earnings report, many analysts rushed to downgrade the stock. Oppenheimer downgraded CVNA to Hold from Buy without a price target; the previous price target was $51.

Carvana (CVNA) Stock Price

Carvana stock is trading today at $4.02, the stock has lost 97% since the beginning of the year, and the market capitalization now stands at $1.27 billion. CVNA stock has a 52-week trading range between $3.63 to $296.70. The CVNA stock hit an all-time high at $376.83 on August 10, 2021.

Our technical picture on November 18

The technical picture remains bearish as the stock is trading at an all-time low. The trend is bearish and lower levels is in the cards. Strong support stands at $6.50 the daily low while a break below might test the $6 mark.

On the upside, initial resistance stands at $8.64 the daily top. A break of the first resistance might open the way for $11.81 the high from November 11. Bulls need to break above the 50-day moving average at $19.12 to take a breath before an attempt to summer price levels

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