Carvana stock could crash over 70%: JPMorgan warns

Carvana Co (NYSE: CVNA) is grossly overvalued and runs the risk of a sharp decline in the coming months, says Rajat Gupta – a JPMorgan analyst.

Carvana stock could tank to $10

On Thursday, Gupta downgraded the online used car retailer to “underweight” and warned that its shares could tank all the way back to $10.

The analyst’s super bearish view on Carvana stock is based primarily on valuation that he says is not at all in line with the fundamentals.

We believe valuation has once again disconnected materially from fundamentals.

Carvana Co is expected to lose $1.15 a share in its current financial quarter versus $2.35 per share a year ago. At writing, its shares are up a jaw dropping 700% versus the start of the year.

Future growth is already factored into CVNA

Things have been moving in the right direction for Carvana this year. The eCommerce platform has cut costs, improved liquidity, and mitigated concerns of bankruptcy.

Last month, the Tempe-headquartered company said it will surpass $50 million in adjusted EBITDA in its current quarter. Still, JPMorgan’s Gupta wrote today in his research note on Carvana stock:

Current valuation is baking in a stronger than anticipated return to growth and related operational leverage in 2024 and beyond for which we have little conviction today.

Earlier this week, Carvana Co said its EV sales have soared close to 800% over the past five years that spoke volumes to strong consumer demand. The Tesla Model 3 is the best-selling electric vehicles on its platform (find out more).